Losing Your Job Needn't Mean Losing Your Money

Let's face it - jobs don't last for life any more. Changes in the economy, new technologies and even good, old-fashioned bad luck can all mean you find yourself suddenly out of work. If you stay that way for a few weeks, then your next employer can keep your paperwork up to date. However, if it takes a little longer to find work, you may be due a tax refund.

How Does It Work?

Here's how it goes. At the start of a tax year, HMRC does a bit of educated guesswork on your behalf. They give you a tax code that determines what gets taken out of your wages before you even see them. That's assuming you're employed under PAYE, of course. Self-employed people have a whole different scheme.

Your tax code assumes that nothing's going to change unexpectedly. If you get laid off or made redundant, then HMRC could well have its sums wrong. Suppose you're still out of work by the end of the tax year, or at least spent a large chunk of it without earning. That means you've ended up earning less that the taxman thought you would, and are owed some tax back. If it was only a short time, up to four weeks, your next employer can sort it out for you. If it was longer you'll probably have to  chase it up yourself, unless you've been claiming a taxable state benefit. If you have, HMRC will deal with it through that.

What If I Get A Large Redundancy Package?

There's another side to this, of course. If you get a serious redundancy payment from your old job, it's actually possible that you'll end up paying too little tax for the year. Funnily enough, the taxman's a lot more on-the-ball at chasing underpayments than at spotting when refunds are due! In either case, you're going to want to stay in HMRC's good books while you get things straightened out.

You can get up to £30,000 in redundancy pay before the taxman starts sniffing around for a bite of it. Then again, paying the tax on a £30,000 redundancy windfall is a reasonably nice problem to have.

Of course, losing your job probably wasn't the best news you had that year. A tax refund could go a long way toward softening the blow - particularly if you haven't claimed one before. For instance, if you travel a lot to temporary workplaces, you might be owed some serious money for your expenses. You can claim back up to four years worth of overpaid tax, with an average payout of £2,500. It may not be the "golden handshake" you deserve, but at least it keeps the taxman's greedy fingers out of your pocket.

As always, RIFT Refunds is your best bet for handling all your tax worries, whether you're in work or out. Give us a ring or email to find out where you stand for free, and we'll take it from there.