If you’ve lost your job recently, there might be some good news coming your way. A government scheme could help you claim up to £2,500 in tax relief.
The Jobseeker’s Allowance (JSA) provides financial support to people who are looking for work. If you qualify, it can cover your living costs while you look for employment. But what happens if you lose your job?
You don’t have to worry about paying rent anymore – JSA covers all your housing costs. And if you do find yourself needing to pay bills, you won’t have to worry about finding the cash either. As long as you meet certain criteria, you can apply for the Universal Credit benefit. This means you can keep claiming JSA while you wait for your next payment.
But if you want to claim the full amount of tax relief, you’ll need to do something else too. You’ll need to prove that you’re self-employed. To do this, you’ll need to complete a Self Employed Income Declaration Scheme form. Once you’ve done that, you’ll need to submit a copy of it to HM Revenue & Customs (HMRC). They’ll check whether you’re eligible for tax relief and tell you what you need to do to make sure you get paid properly.
There are limits to how much you can claim though. You can only claim back the first £3,000 of income you earn each month. After that, you’ll need proof that you earn less than £10,000 per annum. If you earn over £10,000, you still have to provide evidence that you earned less than £30,000 last year.
And if you’re thinking of starting up your own business, think again. You won’t be able to claim for the first three months of trading. So if you start working for yourself in April, you’ll need to wait until September to claim any tax relief.
Step 1 – Do you qualify for a tax refund?
The government has announced it is giving people up to £1,000 extra money each month if they are out of work. This is part of a package of measures designed to help those hit hard by the coronavirus pandemic. But there are some rules around claiming the cash. Here’s what you need to know about the benefits.
If you’ve been unemployed for over six weeks, you could receive an extra £1,000 per month. However, if you haven’t had a job since January 2020, you won’t qualify for the benefit. You must also be able to prove that you’re looking for work and actively seeking employment.
You can apply online via HMRC’s Jobcentre Plus website.
There are three different ways to calculate how much you might be entitled to. These include:
• Your average weekly earnings (AWE). This is based on the number of hours you worked in the previous 12 months.
• Your National Insurance contributions paid during the same period.
• A combination of both.
Step 2: Determine how much tax you owe.
The UK government has launched a new online tax calculator which allows people to find out exactly how much they are liable to pay in income tax.
This calculator uses information about your earnings and deductions to work out whether you qualify for an advance tax payment, and tells you how much money you might save by paying it early.
If you don’t know how much you earn, you can enter your salary into the calculator and see how much you’ll save. If you do already know how much you earn you can use our Salary Calculator to find out how much you’ve earned and how much you can claim back.
You can use the calculator to work out how much you owe in Income Tax, Capital Gains Tax or VAT.
There is no charge to use the calculator, although there may be charges for some services.
Step 3: Reclaim your tax refund.
If you paid less than £8,500 in income tax during the 2017/18 tax year, you might be eligible for a refund. You can claim it via HMRC’s Online Tax Calculator.
You’ll need to complete three steps to claim your tax back:
1. Calculate how much you owe.
2. Find out whether you qualify for a rebate.
3. Apply online to claim your money.
If you get Jobseeker’s Allowance or other taxable benefits, you must declare them.
Claiming benefits isn’t always straightforward. You might think it’s a simple matter of filling out forms and waiting for a cheque to come through. But there are some things you need to know about claiming benefits.
The taxman wants his cut – he gets paid every April 30th. If you claim benefits, you must declare what you earn and pay income tax on it. This could affect how much money you receive from benefits, so make sure you do everything correctly.
Are you claiming Universal Credit?
Claiming Universal Credit does not mean you won’t receive a tax refund if it applies to you. If you are eligible, you will still receive a tax refund. However, you do not need to keep part 1 (the letter) of your P45 to make a claim. Instead, you must provide evidence to show how much money you paid into Universal Credit.
If you are entitled to a tax refund, your new employer should automatically refund you any tax owed to HM Revenue & Customs (HMRC). This will happen within 14 days of starting work. You do not need to wait for your wages to clear before making a claim.
You can find out whether you qualify for Universal Credit here.
If you’ve been unemployed for at least four weeks
Claiming benefits is free if it’s your first claim. You don’t even have to sign up – just turn up at your local Jobcentre Plus office. If you’re already signed up, you’ll receive a letter telling you how much money you could be entitled to. This includes income support, jobseeker’s allowance and housing benefit.
They’ll pay your benefit back once they’ve worked out exactly what you owe them. So, if you’ve got a few months’ rent arrears, you might be able to keep some of your benefits while you work off those debts. But if you fall behind further, you won’t be paid anything extra. And remember, you can always ask for help from Citizens Advice.
Your P45 must contain all the information they need to calculate your entitlement. It must include your name, address and date of birth. It must also show your National Insurance number, bank account details and proof of employment.
Tax on your redundancy money
Your redundancy pay is tax free up to £30,000. If you earn over £30,000, however, you’ll owe income tax on it. And if you’re paid in cash rather than shares, you could end up paying even more tax.
The government says that if you are offered redundancy pay, you must take it – even if it includes holidays or pay in lieu of giving notice. But there are ways around this.
If you receive redundancy pay in shares, you won’t have to pay tax on them. You don’t have to sell them either. Instead, you can keep them and reinvest them into another investment vehicle. This way, you avoid paying capital gains tax.
But if you are paid in cash, you might want to consider selling some shares. Otherwise, you’ll have to pay income tax on the full amount.
You can claim tax relief on your redundancy pay if you use it to buy a house, move home, start a pension or invest in a childcare facility.
Frequently Asked Questions
What can I do if it is too late to file a repayment claim?
If you think you have over paid tax in tax years that have closed for claims, there is a way to reclaim some of that money.
The law allows HM Revenue & Customs (HMRC) to pay back taxes for certain taxpayers who had been underpaying their income tax due to errors by HMRC or another government agency.
In most cases, HMRC will only agree to repay tax for periods prior to January 2005. However, HMRC does offer an exception to this rule called Extra Statutory Concession B 41.
This concession can apply in situations where HMRC has made an error in your taxation affairs, and where there is doubt about the facts.
You must show that HMRC or another government body has made an error in calculating your tax liability, and that there is no dispute or doubts about the facts.
How long will it take to receive a refund?
The length of time it takes to get a tax refund depends on how much money you owe, what type of account you use, and whether you apply online or by paper. You might think there are no limits on the amount of money you can claim back – but there are some restrictions. For example, you cannot claim back more than £10,000 per person, per year. And you must pay income tax within three months of receiving your final payment.