There are several common misconceptions that prevent British expats and anyone else who has worked in the UK from claiming their leaving UK tax refund. Many of our clients living abroad start off their claim very concerned by at least one, if not all, of these unsubstantiated rumours and they can put some people off entirely.
We are committed to making sure that everyone can access the tax information that is relevant to them, in a way that they can understand. We’ve heard these five points so many times that it seemed important to do a quickfire fact check on each one. There are links to more in depth information so that you can further research the areas that are specific to your situation.
Rumour 1: Applying for a tax refund will mean I can’t stay in the UK
This is completely without foundation. A UK income tax rebate can be claimed by anyone who has worked and paid UK income tax. It bears no relevance to your ability to stay and work in the UK.
You do have to make sure that you are following all the tax rules that apply to your situation. For example, if you have certain types of income you must use the self assessment system to pay your tax. This includes income from letting property in the UK, or being self employed . As long as you are fully compliant with the relevant taxation laws, your UK status is completely unaffected.
Rumour 2: Everyone that leaves the UK to live abroad is entitled to tax back
No, not everyone that leaves the UK is entitled to tax back. It largely depends on how much UK income tax you have paid during your time in Britain. And if you have not worked and paid tax at all, then you are definitely not eligible for a tax refund.
In addition your residency status can affect what income tax you pay in the future if you continue to pay tax on income from the UK.
Some expats may not be entitled to a UK tax rebate when they but can become eligible in the future for example if they start paying UK income tax on private or government pension income from the UK.
Rumour 3: I won’t be able to get my pension if I get a tax refund
Claiming a tax rebate has nothing to do with your pension eligibility. It’s your National Insurance Contributions that determine your state pension amount. A tax refund is just HMRC returning your tax overpayment to you. Employment in Britain can continue, you can still live here and it has no impact on your pension at all. In some cases you can transfer pension contributions to the country you live in through a specific process with HMRC.
Rumour 4: I get all the tax I paid in the UK back, when I leave
This is another one of those broad statements that are usually untrue. Usually, you can only claim back all the UK tax you have paid, if you earned less than the tax free Personal Allowance amount. Once you earn over this, you may be entitled to reclaim a percentage of the tax you have paid. All the different factors of your employment come into play and these need to be calculated individually. Typically, you can reclaim tax at the highest rate of income tax you pay; 20%, 40% or 45%, depending on your income bracket.
Rumour 5: I have to leave the UK before I can claim my UK tax refund
When you make a claim depends on why you are owed a tax rebate. Normally claiming a tax refund has nothing to do with where you currently live or work. You can submit a tax refund claim for the tax year in which you are leaving the UK as soon as you have stopped working in the UK and have finalised your date of leaving. If you complete a self assessment tax return you will need to wait until the tax year in which you leave the UK ends before completing your tax return.
UK tax refunds and you
As with most rumours, no one’s really sure where these five UK tax refund myths started but we hope this fact checker has put some of your worries to rest. Nothing is completely ‘one size fits all’ about the UK tax system. The regulations incorporate the different variables of all possible financial situations. Each tax refund case is unique and decided on the circumstance of that particular individual. That’s why accepting generalised rumours as facts is inadvisable. If you’ve been put off making a claim by one of these fake stories before, don’t waste any more time getting your claim started now.
