When you discover someone has received a tax refund, you might wonder, ‘am I due a tax rebate too?’ The chances are – you could be.
At the same time, you’ll likely be wondering the answers to ‘how do tax rebates work?’, ‘do tax rebates happen automatically?’ and ‘why do tax rebates occur?’ – all excellent questions, and ones we hope to answer here.
Many overpayments occur because the taxpayer hasn’t claimed for allowable expenses. We detail these below, along with other reasons that might mean you can claim a tax refund and how to do so.
Cleaning your logo’d workwear adds up – the cost of your detergent and potentially even your washing machine. HMRC acknowledge this by allowing a flat-rate tax deduction to cover these costs – providing they’re used exclusively for work and contain your employer’s logo. There are particular rates for different professions.
Allowances can range from £30 to £1,000 per annum depending on your job. This means that basic-rate taxpayers could be entitled to a £200 refund per year, and higher-rate taxpayers could receive even more at £400. As the time limit to claim a tax refund is four years, this can end up being quite a substantial amount.
If you use your car for essential work journeys (not commuting) then your employer can reimburse you. HMRC allow them to pay you 45p per mile for the first 10,000 business miles and 25p per mile thereafter tax-free. However, if your employer pays you at lower rates then you can claim tax relief on the difference.
Equipment and tools
Claiming a tax rebate for your equipment and tools might be a possibility – as long as these tools are necessary for your profession.
Similar to the cleaning of logo’s workwear HMRC appreciate that some employers require their employees to provide small tools. Again HMRC allow a fixed rate deduction depending upon you job
It may be that you pay subscriptions to a professional body. This could be because you require qualification for your work, or they provide help in another way. Subscription to approved professional organisations and learned societies if the organisation is on the approved list then you can claim the subscription costs.
This is a fairly recent relief, and so you may not be aware of how it works. You may qualify if you are married or in a civil partnership.
It allows a couple to transfer some of their Personal Allowance to their spouse/partner. For example, if one person has used all of their Personal Allowance, but the other earns below the Personal Allowance (£12,500 for 2019/20), then they may be able to transfer up to £1,250. There are specific rules around this to be aware of.
Giving to charity through Gift Aid may lead to you getting a tax rebate from HMRC. If you pay tax at the higher rate of 40 % (£50,000 and above in 2019/20 then you can add tax relief.
As a taxpayer when you make a payment under gift aid the registered charity can claim tax relief on the donations at the basic rate of tax. As a higher rate taxpayer you can claim the difference between your highest tax rate, say 40% and the amount reclaimed by the charity
If you make pension contributions from your net salary and pay tax at the higher rate of 40% then you may be able to claim additional tax relief.
The pension company will automatically claim the basic rate (20%) tax relief on your behalf and put this in your pension. However, if you do pay tax at 40% then you claim an additional 20% tax relief, subject to certain conditions.
Multiple types of income
It’s common for those who earn via the PAYE system in multiple jobs, or who have numerous income sources (such as pension income), to overpay on their tax. If the HMRC systems all work as they should then each employer should deduct the correct amount of tax. However, if you have several jobs at the same time, as say an agency worker, then this becomes problematic. Quite often the wrong amount of tax is collected from each employee, in some cases, this leads to too much tax being paid. It can also mean the reverse, that not enough tax is paid and you, therefore, get an unexpected tax bill.
Inaccuracies and errors
Mistakes can be made in a variety of different ways. Perhaps an employer has made an error when working out the tax owed or, if you’re self-employed, you could have miscalculated it yourself.
The inaccuracy could be down to HMRC too. They may have provided you with the wrong tax code or made an error in another respect.
A tax refund may be on the cards if any of the situations on this list have happened. Wondering how exactly to find out if you’re entitled to a tax rebate? The HMRC website has a specific tool that enables you to figure out if you’re able to claim for a refund.
You can start the claims process at the beginning of a new tax year. And when do you get a tax rebate if you’re due? Normally in September following the end of the tax year.
If you want to avoid the chances of overpaying tax in the future due to errors and ensure you’re claiming on expenses, then it’s a good idea to employ software.
Those who submit a Self Assessment tax return have the opportunity to use GoSimpleTax, which is dedicated to these individuals. Get started today. If you have any questions, we’d be happy to answer them – simply contact us.
Last updated on 18th December 2019.