Tax Rebates when Taking Unpaid Leave

Many companies now offer their employees the option of unpaid leave.

Unpaid leave is where an employee retains a position within the company, possibly with full benefits but does not get paid while they are not working.

Many people are taking advantage of this benefit, and travelling the world. If you have, or are thinking about taking unpaid leave then you need to read this article as you might be able to claim a tax refund, which would no doubt come in very useful when taking time off work.

Why you may be due a tax rebate when taking unpaid Leave

Everyone that works gets a tax free allowance which is allocated in their pay via a tax code each pay period. The current tax free allowance is £6,475, which means that you can earn up to this amount before you need to pay any tax. If you stop working part way through the tax year because you, say, decide you what to find yourself in Thailand, then you may not get your full tax free allowance for the year because you will have stopped working part way though the tax year.

How to Calculate how much of tax refund you can claim

If you take unpaid leave you are still offically working for your employer and so will not be given a P45. Instead, at the end of the tax year (5th April) you will be given a P60 which will show how much tax you have paid to the government and how much income you have made. If you don’t want to wait to get your P60 to find out how much you tax refund will be, you can use the last pay slip that you got before going on unpaid leave.

All you need to do then is input your total pay and total tax into an online tax calculator which will show you how much of a refund you are eligible to claim back from the government.

How to Claim Tax Back for Unpaid Leave

The deadline for making a claim is currently 6 years but this will be changing to 4 soon so we suggest you make any claims as soon as possible.

In order to make your claim you need to contact your local tax office and supply them with your P60 to show them that you have overpaid tax. You may need to complete/include a number of other forms as well including:

1. P60/P45/Statement of earnings
2. P91 – Employmenet history form
3. P85 – Leaving the UK
4. P86 – Arriving in the UK

Alternatively if you would like a trained specialised to obtain the refund for you to avoid the stress and time dealing with the Inland Revenue, you can always apply online.

10 comments

  1. Julie says:

    Hi I’m in full time employment and take unpaid leave on a pro rata basis which is deducted post tax/ni so basically I’m paying tax on earnings that I haven’t had. Can I claim the tax/ni back at year end?

  2. Anne says:

    My child is to go through a major operation and will require 4 months at home afterwards. I have to take unpaid leave in order to look after him. What would I be entitled to claim.

  3. Alison says:

    I have taken unpaid leave from work in order to do other free lance work and wonder if I can use my loss of earnings from taking unpaid leave as an expense on my self employed tax return?

  4. Roger says:

    If I take unpaid leave from my current employer for a period of 5 months and in that time I get a job with someone else for a period of 3 months, how does that work regarding my P45?

    • TaxFix says:

      Hi Roger,

      If you get another job while on unpaid leave, you technically have two employers.

      As you are still technically working for your original employer who you took unpaid leave with, you will not get a P45, until the time that you hand in your notice.

  5. Anonymous says:

    In May 09 my contract with my employer was terminated, my contract included a 3 month payment clause and so I was paid 3 months in leiu of notice in 1 lump sum. Due to this a greater proportion of my salary fell into the 40% tax bracket than it would have done if I had been paid once a month for 3 months. I then spent 4 months unemployed with no income. What am I able to claim back and is it just the £500 (ish) tax free allowance for the 4 months I did not work for?

    • TaxFix says:

      If you earned one large lump sum like you said and got taxed at the rate of 40%, there is a good chance that you can claim a refund.

      It depends on how much you earned in total in the tax year and how much you paid in tax.

      Do you know how much you earned between April 6th 2009 and April 5th 2010?

      If you can put your total income and tax for the year into a tax rebate calculator, it will show you how much you can get back:

      http://www.taxfix.co.uk/calculator

      The tax free allowance is actually £6,475 this year.

  6. Anonymous says:

    I am an international student and I am doing a part time job. Last tax year I have earned £5,500 from employment income. How can I make a claim for getting my tax back and if someone makes a claim for tax back will he face any question at the time of his visa extension?

    • TaxFix says:

      Thank you for your question.

      If you have only earned £5,500 pounds, you will be able to claim back all of the tax that you have paid.

      You can make a claim by going to:

      http://www.taxfix.co.uk/claim

      Claiming a tax refund does not affect your visa. You are simply claiming back what is rightfully yours as you overpaid tax. Everyone that works gets a tax free allowance and you did not get yours and that is the reason why you can make a claim.

      Let us know if you have any other questions.

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