Claim your tax refund or lose it forever!

Many working students who pay tax during the tax year under the Pay As You Earn (PAYE) system, only to have to claim it back at the end of the tax year when it becomes clear that their earnings have not exceeded the annual tax free personal allowance (£9,440 in 2013/14).

With the tax year end fast approaching then, your thoughts may well be turning to a potential tax refund. For the 2013/14 tax year, this will be the case for more students than ever, following the withdrawal of student employee form P38(S). That form was designed to help students employed solely during their vacations avoid tax deductions in the first place.

But, if you paid tax during the tax year 2009/10 that you have not claimed back yet, you MUST do that before 5 April 2014 – or the tax is lost forever. So now is the time to check whether you paid tax during that year and to compare your total income with the personal allowance for that year (£6,475 in 2009/10) so that you can check if you are due a refund.

Getting your refund

If you are a student within the self-assessment system (i.e. your tax affairs are complicated in some way so that you have to file an annual tax return) then any tax refund you are due for a tax year will be reconciled as part of that process. If you, like the majority of taxpayers, are outside the self-assessment system, then your refund will probably find its way to you automatically under HM Revenue & Customs’ (HMRC’s) new PAYE system – however you may have to give HMRC a little nudge to get things moving. Our website shows you how to do this. Do not put this off or you may lose out on money.

There are lots of organisations out there who will help you file your tax return or trigger your PAYE refund – for a fee. However, more often than not, it is straightforward for a taxpayer to do things for themselves and fees are incurred unnecessarily. So here, we have some important tips to help you keep more of your hard earned refund!

Self-assessment

If you are completing your tax return yourself online – make sure you are using the official HMRC site: www.hmrc.gov.uk! This may seems an obvious point, but we have heard stories of several people who have mistaken commercial self-assessment tax websites for the official HMRC website and then found themselves having to pay charges for a mere ‘forwarding’ service.

PAYE   

Many people use tax refund companies to obtain their refund from HMRC on their behalf as there is a misconception that it is difficult for individuals to do. While this probably used to be the case, these days HMRC aggregate employees’ pay and tax details automatically at the end of the tax year and – if you have paid too much tax – will send you a calculation along with a cheque (provided they have an up-to-date address for you. Make sure they have your current address!). All a tax refund company may be doing, therefore, is prompting HMRC to do something (for a fee) that HMRC are going to do anyway (for free).

Health warning   

While HMRC can, and do, take action against dishonest tax agents, often HMRC’s hands are tied because most agents are not doing anything fraudulent or illegal. It is therefore a case of caveat emptor for the customer – when using a tax agent or intermediary of some sort – you make sure you know what service you are buying and satisfy yourself whether the fees are worth the service that is being offered.

You can find a health warning about unscrupulous tax organisations along with a list of the major reputable tax and accounting bodies (which most honest and reputable agents in the UK will be affiliated with) in the Low Incomes Tax Reform Group’s article, Tax Refund Companies – a health warning.

(21-03-2014)