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All About Tax Rebates and Redundancy

By: Paul Geraghty - Updated: 27 Jun 2018 | comments*Discuss
 
Tax Redundancy Payment Finances Inland

Redundancy often means that you have paid too much in taxes for that year. Most people don’t realise this, meaning that their excess payment may go unreclaimed. Unfortunately, the government doesn’t always spontaneously offer you your money back. Sometimes you have to ask.

Your Tax Code

If, like most people, you pay taxes under the PAYE (Pay As You Earn) system, meaning your income tax and National Insurance contributions are deducted from your salary automatically by your employer and then forwarded to the government, you will be given a tax code at the beginning of the tax year. You should be able to see this tax code on your pay slips. The tax code you are given embodies a prediction about how much you are going to earn in that tax year. Essentially, it is an extrapolation of what you are earning at the beginning. It is simply assumed that you will go on earning at that level. Several things can throw the prediction out of whack, however. One is a promotion accompanied by a significant pay increase; another is redundancy, when your income is dramatically lowered or may even cease altogether.

The reason the prediction matters so much is that income is taxed at different rates depending on how high the overall annual (tax year) income is. Everyone is allowed to earn a certain minimum amount free of any tax. This is known as your “personal allowance”. Above that level of income, the standard 22% tax level kicks in, followed by the 40% level after that.

Your tax code implicitly contains a prediction about how much of your income should be taxed in each tranche. When your income drops off abruptly, therefore, some of what you earned earlier in the year may have been taxed at too high a level.

Situations in Which Your Tax Rebate Will be Handled Automatically

You don’t always need to claim a tax rebate even if you’re entitled to one. There are some situations in which it will be handled automatically for you. For example, if you claim a taxable state benefit after being made redundant, any tax refund you are due will be handled automatically. This is because parts 2 and 3 of your P45 contain the information necessary for the government to see that you are owed a refund. Similarly, if you start a new job shortly after ending your old one, your tax refund will also be processed automatically via the PAYE system with your new employer. All you need to do is hand over your P45 to your new employer in a normal way.

How to Claim a Tax Rebate

If the above situations do not apply and you do not expect to either claim benefits or restart work before the end of the tax year (April 5), you should claim your tax rebate personally. To do this, you will need to get hold of a P50 form from Revenue and Customs (HMRC). It is available for download from their website as a PDF file which you should print out, fill in and post back.

You can claim a tax rebate for up to five years following the January 31 after the year to which your claim relates.

Tax Rebates and Redundancy - Conclusion

When you’ve just been made redundant, you need to watch your finances more closely than ever. So don’t let the taxman get more than he’s due.

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[Add a Comment]
@pkc - you won't lose your personal allowance as every tax player is attributed it annually.
RicH - 29-Jun-18 @ 2:07 PM
My £30,000 tax free redundancy will take me over 100,000, does that mean I will lose my personal allowance or is this exempt from that. Thanks
pkc - 27-Jun-18 @ 10:55 PM
Can I claim tax back on severence pay if I claimed JSAafter being made redundant?
Lenny - 22-Feb-18 @ 12:47 PM
Morris- Your Question:
I took redundancy last year due to company restructure, I have done two temporary roles since then and I’m looking for work. Can I claim tax back on these jobs ??

Our Response:
Much depends upon whether you think you have overpayed tax. You would have to take the advice in the article, and/or contact HMRC directly.
RedundancyExpert - 22-Feb-18 @ 10:39 AM
I took redundancy last year due to company restructure, I have done two temporary roles since then and I’m looking for work. Can I claim tax back on these jobs ??
Morris - 21-Feb-18 @ 9:27 AM
Hello, I'm considering taking voluntary redundancy and trying to work out what the tax implications will be. Depending on the outcome, it's possible this could be paid on March 15 (current tax year) or possibly April 15 (new tax year). Which would be better in terms of claiming a tax rebate in the summer, as if I take this route I'll probably take a few months off? It's possible that I'll be paid three months notice period and that month's pay at the same time (four months in total - £21,600), together with unspent holiday pay (£3000) and a tax-free redundancy payment of £7000. Many thanks.
Timmers - 20-Feb-18 @ 4:25 PM
Ste - Your Question:
I was made redundant on the16 th jan 2018.The company went in to liquadation I have worked for the same company for 21 years.can I claim my tax back

Our Response:
You can contact HMRC to see whether you are owed any tax from the previous financial year, which is a separate issue to your redundancy. You can claim money via the government if your employer has become insolvent and you are owed money, please see link here, which will help you further.
RedundancyExpert - 19-Feb-18 @ 12:48 PM
I was made redundant on the16 th jan 2018.The company went in to liquadation i have worked for the same company for 21 years .can i claim my tax back
Ste - 18-Feb-18 @ 9:04 PM
If I am due a tax rebate does this affect the amount of universal credits I will get
Colin - 8-Jun-17 @ 6:12 PM
Made redundant in Dec 2016 received government Max redundancy am now on contribution based jsa do I claim tax rebate it will jobcentre automatically sort ?
Amanda - 2-May-17 @ 5:15 PM
wag - Your Question:
I am being made redundant on the 1st of april this year I am 59 and been full time work for 15 years am I entitled to a rebate

Our Response:
You would have to contact HMRC directly.
RedundancyExpert - 17-Mar-17 @ 2:32 PM
i have been made reundant after 15 years full time work am i entitled to a rebate
wag - 10-Mar-17 @ 8:25 PM
i am being made redundant on the 1st of april this year i am 59 and been full time work for 15 years am i entitled to a rebate
wag - 10-Mar-17 @ 8:22 PM
I retired in January 2016 well before the government age I did not get any payment will I get a tax rebait Yours faithfully B Hook
Bill - 8-Apr-16 @ 6:48 PM
I retired in January much earlier than my retirement date no retirement payment am I entitled to get a tax rebait. Thank you B Hook
Bill - 8-Apr-16 @ 6:46 PM
I have recently been made redundant and received £115,000, £30,000 of which is tax free so I was taxed at 40% on the remainder as I had earned £45,000 already this tax year. All tax payments were PAYE. I am now being asked for an additional £4,000 tax as my personal allowance has been removed as I earned over £100,000 (reduction of £1 for every £2 over the £100,000) but I only crossed this level due to being made redundant and didn't directly "earn" this money. Where do I stand?
Gazpacholulu - 11-Mar-16 @ 12:28 PM
Hi I have just been made redundant and should receive my payout during March. My employer is now saying they have mislaid the paperwork which could delay payment. If it's paid in April will it be covered under the new tax year.
Tulip 2016 - 5-Mar-16 @ 6:19 PM
Jono - Your Question:
I took my redundancy on June the 5th I would like to no if I can claim any tax rebate

Our Response:
You would have to check directly with the HMRC.
RedundancyExpert - 9-Oct-15 @ 1:53 PM
I took my redundancy on June the 5th I would like to no if I can claim any tax rebate
Jono - 8-Oct-15 @ 8:45 PM
Hi, I have been made redundant on Nov 2014, and till now I am unemployed and actively seeking for job. I didnt know that there is thing called "Tax refund if you are made redundant". Today i got a text saying "you are eligible for tax refund"- later i found that this text is a "scam !! ", along with that I researched on HMRC aboutwhat is Tax refund. So I have been redirected to this thread. 1. Can anyone tell me what are my rights are? 2. will i be able (eligible) to get any tax refund? 3. How much I will geti have been paying tax since salary detailsbefore taxApril 2012-Oct 2012 = £950/month April 2013- Feb 2014= £23000/annum March 2014-Nov 2014=£24000/annum Thanks Sam 4.
Sam - 2-Apr-15 @ 9:19 PM
@Callinghall - your redundancy up to £30k is tax free, so you can't claim a tax rebate on something that isn't taxed in the first place.
Izzy - 30-Mar-15 @ 11:53 AM
Can I make a tax claim on redundancy money which was over £30,000 going back to April 2008. I was out of work for 6 months after I received my redundancy, and am now in part time employment
Callinghall - 27-Mar-15 @ 2:40 PM
@frankie - I have included a link to the free and impartial money advice, website set up by government here which should answer your questions and help you check how much you may be owed. I hope this helps.
RedundancyExpert - 10-Feb-15 @ 10:26 AM
Hi I have just been made redundant can I claim my tax backI am 67 years of age It is doubtful I will gain work before April 5th 2015
frankie - 9-Feb-15 @ 1:45 PM
@dougie - I'm sorry to hear you have been made redundant.If you think you have been taxed wrongly then I suggest you get on to HMRC, and try and sort it out with them directly, it might be worth doing it just to double check your company has got the figures right.However, while up to £30,000 of your redundancy may be tax free other elements of the package i.e holiday pay and pay in lieu of notice – will be taxed in the same way as any other pay. I hope this helps.
RedundancyExpert - 15-Jan-15 @ 10:22 AM
I was made redundant on Xmas eve,my final weekly salary,plus my holidays were paid,but taxman taxed me heavy,so infact i never seen my Holliday pay,gutted,
dougie - 14-Jan-15 @ 3:43 PM
Hi, I have just been made redundant and am going back to work a month after finishing from my old employer. How will this affect my tax code now I have had my redundancy new money, regarding my wages with my new employee? Will I get super-taxed?? Many thanks, Steve
Hadders - 15-May-13 @ 9:08 PM
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