Leaving the UK? Tie up those loose ends!
A common mistake made by taxpayers leaving the UK is the failure to claim a refund of overpaid income tax.
All UK taxpayers (and some non residents) are entitled to a UK Personal Allowance (basically a tax free allowance). The personal allowance of PAYE taxpayers is split into weekly or monthly amounts and offset against their weekly or monthly payments. The taxpayers leaving the UK part way through the tax year don’t get the full benefit of their personal allowance and usually overpay UK income tax.
To reclaim the overpayment a tax return needs to be filed with HMRC. Often the departing taxpayers are not aware of this and needlessly leave their money with HMRC. The timeframe for making such claims was revised down to 4 years.
Self–employed (self assessed) taxpayers are subject to a different method of tax withholding. They must file a Tax Return annually, declaring their income and working out their tax liability instead of the tax being taken via PAYE.
The tax itself is paid as follows:
- 31st Jan – 1st Payment on Account (POA);
- 31st July – 2nd POA;
- 31st Jan next – Balancing payment – the difference between the amount paid as POA’s and the final liability becomes due.
Self-assessed taxpayers who leave the UK part way through the year may therefore have overpaid tax because of their POA’s. The POA is an estimate of the current year liability based on the prior year. If a trader ceases part way through the tax year therefore, the POA’s are likely to be excessive. It’s best to consult with a professional tax preparer to make sure your taxation matters are in order.
The overpaid tax should come out in the wash when the taxpayer files his final Tax Return but it’s important to remember that you must submit a tax return.
