Newly bankrupt - quick question

DavidDAM

Hi all,

Hope you are doing well. I had a quick question.

I received a letter from HMRC this morning and don’t know what to make of it.

The situation

I was declared bankrupt on the 14th of December 2019. I had left my employment on the 30th of November 2019 and received my last pay on the 12th of December which covered me up until the 15th of December (2 weeks notice).

HMRC sent me a letter saying they will be refunding the tax I paid on that last pay packet to the official receiver.

I did confirm with the official receiver I was out of employment and am likely to be so for a few months at least.

Will this cause me any issues as the official receiver has even quiet and said there isn’t anything further to do. Are they likely to get back in touch with questions around how I might have used my last pay packet as it was only a couple of days before bankruptcy?

Also why would hmrc refund The tax on this pay packet if it was paid before I was made bankrupt?

I am a serious worrier and struggling with stress at the moment - any help would be much appreciated

Thank you

Minkym00

On the face of it it looks like an error on HMRC’s part. But you haven’t received any benefit in any case.

The OR won’t be concerned at all about this, you’ve nothing to worry about.

Mouse007

I would expect a tax refund to arise in the circumstances described. Under PAYE you are given part of your tax free personal allowance each week/month. If you stop working before the end of the tax year you may be due a refund on the balance of your personal allowance.

For 2019/20 you might be due a refund of up to 20% on 17/52 weeks of £12,500 which would be £817.

That is because there are 17 week left in the tax year (Mid December to 05/04/20). From 06/04/19 to mid December you would only have been given 35/52ths of your personal allowance but are still entitled to the whole amount.

In the year of bankruptcy your “tax account” is effectively frozen at the date of bankruptcy, you pay no tax until the end of the tax year which is why others (still in employment) end up with a NT (No Tax) tax code and then have to pay the saved tax back to the OR.

This refund, an asset of your estate, now belongs to the OR, hence HMRC’s letter. It is normal and correct.

Nothing to either worry about and nothing you need to do.

DavidDAM

Thank you both for your response.

I was worried the official receiver would question how I spent my last pay packet before being made bankrupt but it seems like I have nothing to worry about.

It’s hard to not be nervous or worried about bankruptcy but gong to try my best!

FATDA

I am a serious worrier and struggling with stress at the moment - any help would be much appreciated

DavidDAM

Welcome to the forum @FATDA

This forum is fantastic in helping you get answers to some of the things that might be causing you stress.

For me it’s the “what might happen” that causes me stress which is why a forum like this where many knowledgable understand the bankruptcy process far better, and where lots of others have already been through it is invaluable.

Please do ask questions, ask for advice and remember that although it is stressful, bankruptcy is there to HELP people with the burden of debt and give them an opportunity to start again.

luvchocolate

FATDA wrote: »

I am a serious worrier and struggling with stress at the moment - any help would be much appreciated

Hi and welcome, please start a new thread if you want to ask any questions