Reclaim overpaid tax during tax year

aroominyork

My wife has been on sick leave since Feb 2023 and her contract (quite rightly) has now been terminated. Her final pay, including notice and untaken leave, has been taxed at 40%. She will be able to reclaim most of this when she completes her FY25 self-assessment, but my question is whether she can get a refund (it will be about £5k) sooner, either by applying for it (how?) or will HMRC automatically pay it when (if?) they know her empoyment has been terminated?

Dazed_and_C0nfused

aroominyork said:

My wife has been on sick leave since Feb 2023 and her contract (quite rightly) has now been terminated. Her final pay, including notice and untaken leave, has been taxed at 40%. She will be able to reclaim most of this when she completes her FY25 self-assessment, but my question is whether she can get a refund (it will be about £5k) sooner, either by applying for it (how?) or will HMRC automatically pay it when (if?) they know her empoyment has been terminated?

They wouldn't know that though, and even if they did how would distinguish between someone who doesn't expect to work again this tax year and would start a new job the next day/week/month 🤔

I think she should be able to claim a provisional refund by submitting form P50.

But as she is completing Self Assessment return for this tax year she needs to remember that she must declare the refund on her return. 

When she completes the employment page of the return she will report the facts, for example say £8,000 tax was deducted by her employer then she enters the £8,000.

There is a separate question about tax already refunded by HMRC and she would report the amount refunded from the P50 claim there.  She doesn't reduce the tax deducted figure on the employment page to factor in the refund.

aroominyork

Many thanks D&C. Is P50 an online submission that leads to a quick refund (self-assessment refunds arrive within a week) or a manual process which takes a year if you are lucky?

Dazed_and_C0nfused

aroominyork said:

Many thanks D&C. Is P50 an online submission that leads to a quick refund (self-assessment refunds arrive within a week) or a manual process which takes a year if you are lucky?

You can do it on online.

I think a key thing is to make sure HMRC have received the final payment details from her employer before applying.

She can check that on her Personal Tax Account.

https://www.gov.uk/guidance/claim-back-income-tax-when-youve-stopped-working

aroominyork

The link you give says "have been unemployed for 4 weeks or more and are not claiming taxable state benefits". She receives state pension (and an NHS pension). Does that make her ineligible for an in-year refund and mean she must wait until an end of year self-assessment?

Dazed_and_C0nfused

aroominyork said:

The link you give says "have been unemployed for 4 weeks or more and are not claiming taxable state benefits". She receives state pension (and an NHS pension). Does that make her ineligible for an in-year refund and mean she must wait until an end of year self-assessment?

Quite possibly.

Which do HMRC consider to be her main source of income?

This is normally the one that has a K, L, M or N code allocated to it.

The other having BR, D0 or a T suffix code.

aroominyork

Her codes were changed ten days ago. Now her NHS pension is BRX (previously D0) and the job she is leaving is 198LX (previously 395L).

Dazed_and_C0nfused

Well once the final payment info has been submitted by her employer she could see if HMRC will make her NHS pension her main source (for tax code purposes) and issue a code to the NHS pension payer with details of her pay and tax from the job that ended.

That would allow them (the NHS pension payer) to refund any excess higher rate tax with later months pension payments.

NB.  HMRC only provide the pay and tax details, they won't disclose who she worked for.

sheramber

Does the £5k  take into account the tax due on the state pension and the NHS pension until the end of the year as well as her employment income from April until the leaving date?

aroominyork

Dazed_and_C0nfused said:

Well once the final payment info has been submitted by her employer she could see if HMRC will make her NHS pension her main source (for tax code purposes) and issue a code to the NHS pension payer with details of her pay and tax from the job that ended.

Is there anything she can do to influence this or must she just sit back and see what HMRC does? 

sheramber said:

Does the £5k  take into account the tax due on the state pension and the NHS pension until the end of the year as well as her employment income from April until the leaving date?

I don't understand tax codes well enough to answer that. There will doubtless be some end of year tidying up to do, but for now it's just the large tax overpayment we are focusing on.