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.