Going to Work in the UK? Tax Refunds Explained

If you’re going to the UK to work it’s important to know a few UK tax facts to make sure you don’t end up losing your money.

When you start work in the UK you need to make sure you give your employer your National Insurance Number so you avoid paying emergency tax – which is much higher than the normal UK tax rates. Your National Insurance Number (NIN) is the unique number allocated to you by the Department for Work and Pension in the UK. It allows you to work, pay taxes and access public services in the UK.

PAYE and Self-employed tax

Once you start working you will need to pay UK tax either as a PAYE employee (if you’re a receptionist, nurse or a teacher for example) or as self-employed person, such as a construction subcontractor.

If you are PAYE your employer should deduct tax from your earnings each time you get paid. If you are self-employed you are responsible for your own UK tax return called a self-assessment tax return. As a self-employed in the UK you can claim back work-related expenses such as work tools, transport and dry cleaning your work uniform.

If you’ve started work already in the UK you will be paying 20% income tax on earnings above £1830 and 40% on any earnings over £36,401.

Claim your UK taxes back

If you do end up on the wrong tax code and overpay tax in the UK, you can claim this money back once you leave the UK or when the tax year ends on April 5th. You have up to six years to claim any overpaid UK tax.

If you want to find out how much you could be owed, you can use a free tax refund calculator.

To claim your UK tax refund, you need to file a tax return. A tax return is the annual submission of tax forms documenting your earnings, taxes paid, deductable expenses and benefits that you send to the HM Revenue & Customs for review.

From this information it is determined whether you have overpaid tax and are owed a tax refund.

The amount of your UK tax refund depends on factors like:

  • Your earnings
  • Your expenses
  • Whether you worked the whole tax year
  • If you had more than one job at a time or changed jobs
  • Whether you have children
  • If your circumstances changed, eg: you became self-employed
  • If you took a break during or between employments

When choosing a tax return company, we recommend that you select companies which:

  • Are HM Revenue & Customs registered agents
  • Have an office in the UK
  • Can guarantee that your tax refund will be 100% legal and safe


Ways To Pay Less Tax and Still Stay Within the Law

We would all like to pay a little less tax to the tax authorities and with careful planning you can do just that whilst staying, of course, completely within the law and abiding by the tax regulations. These ways of saving tax refer to the tax jurisdiction of the United Kingdom so may not be relevant if you live elsewhere in the world.

One of the easiest ways of saving tax is to make full use of your available allowances.

If you have a spouse (or civil partner) who has no income then transferring savings and investments that are currently paid interest after the deduction of tax will save you the tax on that interest. Even if you only have a small amount of savings the tax saved can mount up quickly. Of course, you would want to trust your other half completely before embarking on this strategy especially if you have considerable investments.

From 6th April 2015 new rules come into force that will mean a spouse can transfer 10% of their personal allowance to the other partner, provided you are not a higher rate tax-payer. This would only be beneficial if one partner had an income that didn’t allow full use of their own personal allowance but the other did.

For high earners with incomes over £100,000 per year their personal allowance is reduced gradually for every £1 over that limit until the point where there is no personal allowance for those earning over £120,000 per year (in the 2014/15 tax year). There are several ways for such high earners to retain their personal tax-free allowance of £10,000 per year. One is to transfer any savings and investments that produce an income to their spouse or civil partner to bring their annual income back below £100,000. Another is to make contributions into their own pension, again of an amount that will reduce their yearly earnings below the threshold.

Age-related Personal Allowances

Currently anyone born before 6th April 1948 is entitled to a higher personal tax-free allowance and those born before 6th April 1938 to a higher allowance still. However, these allowances are gradually being phased out by keeping the amount at the same level until the non-age-related allowance is at the same level.

While this allowance is still available the same strategies to maintain the full allowance apply as for the standard personal allowance.

Annual CGT Exemption
Anyone with a portfolio of investments generating a capital gain should make sure to use the annual capital gains tax exempt amount.
For the 2014/15 tax year in the UK any sales of assets where the gain is less than £11,000 will benefit from this amount being tax free. Selling some assets or shares each year where the gain is below this threshold will allow you to take tax free profit from your portfolio over a period of time. The timing of selling shares is, therefore, crucial if you want to save tax.

These and other strategies to save tax can be complicated so always seek the advice of a chartered accountant or professional tax advisor to make sure you both stay within the law but, at the same time, benefit from all allowances that you are entitled to.