Claiming for repayment of tax when you have stopped working
The long summer break is a great opportunity for students to earn a little bit of extra cash. However, you may have noticed tax deducted – probably the last thing you wanted to happen! Well the good news is that you probably can claim that tax back. We will walk you through the process.
As a student working in the summer holidays, you may find that more tax is taken from your pay packet than you actually need to pay. This is basically because your PAYE (Pay As You Earn) deduction is usually based on your weekly/monthly pay but your overall tax liability is calculated annually. So if you get a summer job for ten weeks that pays you £250 a week, the PAYE system will expect that you will be getting this wage every week of the year and think that you are going to earn £13,000 and will deduct tax accordingly. In fact, you will only earn £2,500 during the tax year – which is less than the current £10,000 personal tax threshold – so any tax that you have paid should be due back to you.
If you have now returned to full time study and definitely will not be working again before 5 April 2015, (including any part time or casual employment) you can make an in-year tax refund claim on form P50). You can use HMRC’s tax checker tool to work out how much your refund might be.
Historically form P50 has been a paper form, but HMRC are currently trialling an online version. There are a few points to be aware of:
- You will need to have installed the most up-to date version of internet explorer or other browser.
- You cannot save a copy of the form and come back to it partly completed so do make sure you have all information to hand before you start, including:
- Your personal details, including your address, telephone number, date of birth, and National Insurance number.
- The P45 from your summer job (your employer is required by law to give you a form P45 and should do so automatically). If you have lost your P45 you can ask your former employer for a ‘statement of earnings’ which HMRC should accept in lieu of a P45. A statement of earnings is a signed letter on headed notepaper from your employer giving details of your pay, any tax deducted, your PAYE code number, your National Insurance number and the date of leaving.
- The form asks if you can provide your employer’s PAYE reference number (you will find this on your payslip or form P45 – normally in this format 234/F421) but the boxes presented for you to complete only accept numerical data, meaning that unfortunately you cannot progress with the form. As this is a trial form we suggest you say you do not have the reference number in order to move on. We have alerted HMRC to this problem and understand it will not affect your claim.
- If you complete details of any other income or taxable benefits you have received since leaving your summer job then, even though the form allows you to progress, it may be the case that once reviewed by HMRC they will ask you to wait until the end of the tax year to claim your tax refund, once they have fully reconciled your end of year tax position.
- If there is a repayment you can say where your refund cheque should be sent to but you can have the payment made direct to your bank which may help speed things up.
- You must sign and date the form before posting.
We have provided feedback to HMRC on this trial form P50 and suggested various improvements including the fact that they have withdrawn the full, downloadable, PDF version of the form which may make it difficult for some. We have requested HMRC reinstate the PDF version until the limitations of the trial version have been addressed.
Finally, you should be aware that if you make a declaration that you do not expect to work again, but then do, you may pay ‘emergency tax’ for the remainder of the tax year – meaning that you may overpay again. If this is the case then HMRC’s reconciliation system should aggregate all your pay and tax details at the end of the tax year and any further refund should be automatically repaid by cheque provided HMRC have an up-to-date address on file. It is worth checking the address that HMRC holds for you in readiness.
For more information see our section on claiming a tax refund.