Friday 30 September 2011

Hassle Free Tax Refund

Have you seen those adverts on television and in the newspapers for companies that will get you a tax rebate? Companies like 1st Contact, TaxBack.com, Taxrebateservices.com, Refunds Direct and many more who offer a no win, no fee basis and promise to get you back overpaid tax for a fee. A fee that could be as much as 40%.

After a conversation with a tax officer today, it turns out these people are taking a large wedge of your tax rebate for 30 seconds work and doing what you can do yourself for a price of a stamp and half a minute with a calculator and a pen.
How it works is these companies request your P60s and P45s and after working out how much of a rebate you are due, and their share, they just post your forms off to the Inland Revenue requesting they assess the necessary years and wait until the cheque comes back, take their share and send you the remainder. If you are due £1,000, you are happy because you get £600, they are happy because they earned £400 for a minimum amount of work but how much happier would you be if you got the full £1000?

They will tell you it is hassle free and even that they can get any refund quicker but the only hassle you have is rounding up your P60s/P45s and writing a letter requesting the Inland Revenue check to see if you have overpaid Tax for the last few years and request they repay it if you have.
That's it and you either get a repayment six weeks later or a letter advising that you paid the correct amount of tax.
The refund companies have no special line to HMRC that gets it dealt with any quicker no matter what they claim, all post is dealt with in date order so regardless if you or the refund company send it in, it will dealt with at the same time. If an Agent is seen trying to jump the queue, they face a lengthy investigation process and security checks which hold up any repayment even further.
These companies don't do anything that you can't do yourself, the only difference is whether you get the full rebate you are due or you pay someone 40% to do it.

To work out if you are due a rebate, and this is the 30 seconds the refund companies make you pay so dear for, is a simple formulae if you earn less than £35,000 a year.
On your P60, find your earnings for the year (eg 20,000), find your tax code (eg 747L), add a 5 on the end (eg 7475) and take that away from your annual wages (20,000 - 7475) and that leaves you the amount you are taxed on (eg 12,525).

Minus 80% (the current lower tax rate is 20%) from the amount (eg 12,525 - 80%) and that is the amount of tax you should have paid (eg 2,505). Look at your P60 and if you paid more than that then grab a pen and write to HMRC and request they assess that years tax paid and make a repayment if necessary. If you are not sure, send in your P60 with the letter anyway and they work it out for you.
It really is that simple and exactly what the refund companies do and charge you an extortionate 40% for.

As the advert says, tax doesn't need to be taxing and as i say, don't be a mug and give away money when you don't need to. Hell, leave your pay, tax and tax code details in the comment box and i will work it out for you and all i will charge is a voluntary donation towards the price of my daily caffè latte.

2 comments:

Unknown said...

Thanks for sharing this..

No win No fee

Martyn said...

This is great. I used your formula and it worked out exactly what my last P60 said apart from a few pence so i am not due anything but after checking the other years i had paid £137 to much tax in 2009 so i am writng a letter to the inland revenue to ask for it back. Thanks.