Tax Rebate for Individuals

The financial world is facing turbulent times. In a mostly money driven society, the impact is felt by everyone. Naturally, a means of mitigating this impact would benefit everyone, too. While reducing your expenses or increasing your income are very effective means, sometimes it can be too much of a burden to do either – your budget already stretched too thin, or extra income too complicated to come by.

That’s where optimising your income can come in handy. And the way you do it is by optimising the amount you lose to taxes.

What is a tax rebate?

Oftentimes, people confuse tax rebate with tax refund (return). While they ultimately have a very similar effect, tax rebate helps you reduce your overall tax liability before you even pay taxes. Tax refund, on the other hand, is the amount of cash you’re eligible for after you’ve already paid the aforementioned taxes and have filed for a tax rebate.

As a taxpayer, you can be eligible for rebate any given year, depending on various circumstances. For instance, whenever you change jobs or move to/from abroad – you may be eligible. The same goes for when you pay for work expenses out of your own pocket. More often than not, it’s the case of too much tax being withheld from an individual’s pay cheque due to lack of information regarding outstanding tax liability. But, the list can go on and on.

How can I claim tax rebate?

In the UK, taxes are managed by Her Majesty’s Revenue and Customs services, or HMRC for short. Therefore, in order to receive any form of tax advantages or refunds, an individual or a company shall file with HMRC. This is similar to how taxes are managed throughout the world, via the national revenue service.

Let’s say that any individual has reasonable doubt or clear knowledge about being eligible for a tax break. In such a case, aforementioned individuals should file with HMRC to receive an allowance, refund or credit.

Typically, this process can be quite straightforward, making it accessible to almost everyone. All that’s necessary is an HMRC services online account that allows you to quickly and easily access all your information and applications. Of course, you can also use the good old paper form to apply via mail.

As previously mentioned, there can be various reasons why an individual may be eligible for a tax rebate. Here are some:

• Work expenses (travelling, uniform, work from home).
• Emigration.
• Pension tax relief (applies to those within a higher tax bracket who make pension contributions).
• Payments on account. When filing a self-assessment tax return form, if your earnings are less than the payments prepaid, you’re due for a rebate.
• You have more than one job and the second employer applies the basic tax rate to the entirety of your pay.
• There’s an issue with your PAYE (Pay As You Earn), i.e. – there’s been an error with how your payments have been made.
• You’re in the construction industry scheme.

These and other situations may differ from taxpayer to taxpayer. But, in most cases, there can be found a basis for a tax rebate. In order to determine whether you are eligible – use the HMRC tax checker tool. It will help you determine your overall tax liability and therefore – if you’re due a rebate.

Should I use a tax refund company?

Even though the HMRC offers a rather straightforward way to apply for a tax rebate, there can sometimes be a need for assistance with your taxes. And, truly, for most of us tax forms and applications may really seem like something out of a spell book. At first, anyway.

In such occasions, it may be prudent to consult with a financial (tax) advisor or pay someone to do it in your stead outright.

It’s important to understand, however, that tax refund companies are largely unregulated and are not government agents. This means that there’s often no real incentive for you to use their service other than empty promises.

On top of that, many companies charge high minimum service fees or even a percentage of the rebate, which can make your jaw drop. This in turn makes the service disadvantageous. Especially if the actual tax rebate isn’t that large a sum.

Earlier this year, a report on BBC News stated that there are more than 200 companies in the UK identified as having something to do with tax refunds. Most of these companies charge huge amounts of money, while promising their customers an advantage in tax refunds. However, the HMRC has no affiliation with these companies, and they are served as ‘first-come-first-served’. Going straight to HMRC is free of charge, while using these 3rd party services can come at an unreasonable price.

What to look out for?

Other than money-hungry tax refund companies, there are some things that you should also pay mind to. One of the more important things is time.

First, it’s important to remember that there are time limits for claiming back your overpaid tax. It is 4 years and the limit for tax year 2021/22 is April 5, 2026. After the time limit has run out, the tax year becomes ‘closed’ for claims.

However, if by any chance you’ve made an error and missed the time window, there’s an additional possibility to reclaim tax. It’s an additional rule called Extra-statutory Concession B41 that allows the HMRC to repay your claim. The only difference will be that this claim will be repaid only if the tax error had been made by the HMRC or another Government Department, and you will have to present clear evidence of this.

To save yourself any additional trouble, try to avoid any scams that may arise even when you’ve not applied for a tax rebate. For example, if you get an email or a text from HMRC saying that you’re eligible for a tax rebate or there’s an outstanding tax refund to your name that you should claim – it is more than likely a scam. The HMRC will never contact you via email or text.

If you believe you’ve received a fraudulent email or have fallen victim to a scam-attempt, forward the email to phishing@hmrc.gov.uk to help them counter these scams. You can also contact the HMRC via one of their phone lines.