Understanding tax rebates

Understanding tax rebates

tax rebate

Are you paying too much tax to HMRC? If so, you could find yourself out of pocket. Fortunately, claiming isn’t as hard as people think. Knowing where to start is a different matter altogether.

In this short guide, we’ll help you learn whether you’ve overpaid and, if so, what steps to follow to get a tax rebate.

How do I know if I’ve paid too much tax?

If you think you’ve overpaid, you’ll need to work out your tax liability. You’ll then need to offset these calculations against how much you’ve paid already. This will involve collating all information pertinent to your household income and present tax status.

A range of documents will need to be located and assembled before you can conduct your review and determine whether you can make a claim. Lengthy though this process might be, it will pay dividends if a rebate is due from HMRC.

You will need to gather the following paperwork:

  • Your P45 and/or P60, copies of which will be available from your pension provider or employer
  • Should you be in receipt of taxable benefits-in-kind, you’ll need to ask your company for a copy of your P11D
  • Dig out any paperwork/statements that show how much interest has been paid on any PPI claims (and what was deducted, if relevant)
  • To determine if a tax rebate is due, dig out your recent bank statements (or certificates of tax if relevant)
  • As above but repeat the process for building society statements where appropriate

To determine if you can make a claim, also hunt down any dividend certificates you hold – plus information about rental income or expenses, and any taxable state benefits you’re in receipt of.

How do I work out my tax liability?

The first step is to crunch some numbers and work out your taxable income. In order to do this, you’ll need to add gross amounts to your calculations. Not sure what this means? It’s the amount you earn before deductions like tax, national insurance and pension contributions.

When working out your tax rebate and liability, remember that some expenses are deductible from your affected income. Make sure you use the proper rates when running your calculations. You can then work out exactly how much tax you’ve paid. You will then be able to determine whether you’ve overpaid or underpaid.

Do you live in Scotland? If so, and you pay tax, a different range of bands and rates will apply to any non-savings or non-dividend income you have.

HMRC Tool

If you’re working out your tax rebate, use HMRC’s checker tool which will help you work out if repayment is due. This online calculator is especially useful if your situation is complex.

Before using the checker to determine if you can claim tax back, read the guidelines. That way you can better understand if the tool is suitable for your aims – while also gaining insight into what information you’ll need.

How long do I have to claim tax back?

If you’re due a tax rebate, you have four years to claim. This period begins at the end of the tax year in which the reclaimable amount became due. Should you fail to file your claim within this time window, you won’t qualify for a refund from HMRC.

The below table shows cut off dates for years 2017-2024:

  • 2016/17 (year ended 5 April 2017): claim no later than 5 April 2021
  • 2017/18 (year ended 5 April 2018): claim no later than 5 April 2022
  • 2018/19 (year ended 5 April 2019): claim no later than 5 April 2023
  • 2019/20 (year ended 5 April 2020): claim no later than 5 April 2024

If HMRC makes a clerical error, meaning your request to claim tax back isn’t processed, you have the right to appeal by contacting them directly. Such an eventuality is rare and the error must be unambiguously proven.

How long does it take to get a tax rebate?

This question crops up frequently. Usually, the time period varies from five to eight weeks. A range of factors explains this broad timescale – including whether the application was made online or by paper; the system used (i.e. Self Assessment or PAYE), and what security protocols were/weren’t used during the process.

However, during the coronavirus crisis, there is likely to be a delay. HMRC are sending out automated messages to those requesting tax rebates saying that it will take longer than usual due to complications linked to COVID-19. If you need your tax rebate quickly, all you can do is send your documents as soon as possible and hope they don’t take too long to process.

Should I use a tax refund company?

Tax refund businesses are in abundance online. They exist to help people submit their repayment claims – promising them a fast and seamless process in exchange for a modest fee. 

Although some of these companies are above board, many get a bad rep due to the clickbait headlines they use to gain attention. These slogans typically suggest the visitor is due a tax rebate and the company often claims to be working in an official capacity for HMRC.

In fact, it’s easy to claim tax back. Using one of HMRC’s online systems, you can submit your claim without any hassle – and, just as importantly, without paying any service fees.

Why should I be wary of such organisations?

The costs can be high and include a minimum service fee and a slice of the repayment figure obtained on your behalf. It’s not improbable that you could end up paying more out than you get back.

Also bear in mind that such companies may purport to work on behalf of HMRC but this does not mean they are endorsed by them. 

Loss of control & undue risk

The refund company you may ask you to sign a 64-8 authority form. By doing this, you’re giving HMRC consent to liaise with your service provider about your affairs. Unless you withdraw this authority, you could be bound to continue using that organisation’s services (and keep paying its fees).

Your rebate provider will usually ask to receive your repayment directly. They will then give you the balance, less their fees. This means there’s an element of risk involved, in that you have to implicit trust the company to transfer your repayment. It might be better to trust the process to a qualified adviser, rather than an online provider.

As mentioned, it is worth trying to submit your claim without the intervention of a third-party where possible.

Talk to the Films4U team

We’re experts in the area of film investment. With 100 years of combined experience, we haven’t lost money on a film yet! Our expertise is backed up by our many success stories – as well as the renowned actors and studios we’ve worked with over the years.

Taxation plays a pivotal role in our industry. Film investors benefit from a range of tax advantages, for example, that are supported by the UK government. We’d love to answer any questions you have on this topic, so get in touch to discuss your plans further.

You can also apply online if you’re a film financier looking to get involved in one of our next high-profile projects.

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