Working out whether you are liable for a tax refund is quite an easy thing to do as it is all comes down to the salary allowance you are given by the British government each year, which is entirely tax free. The current tax-free personal (so doesn’t apply to a Limited company, although a contractor withdrawing money from their own limited company is still eligible for it) allowance is £8,105 but can increase or decrease each tax year depending on the government’s policy (it is regularly reviewed).
This personal allowance is offered to any contractor (and indeed any UK resident) who earns under £100,000 per year and means that you are entitled to claim back any tax that you paid on the first £8,105 you earn.
Applying for a Tax Return
To apply for a tax return that you feel you may be due you are required to submit a series of forms, all of which are available to view and download from the HMRC website. The first step towards ensuring you do not leave things until the last minute is to make sure that you have these forms ready for submission. Some details will be required from your employer or former employer which can be a time consuming process so the earlier you start attempting to get everything together, the better chance you have of being prepared.
If you have got all your documents together and they are ready to be sent off, you can send a letter to either Inland Revenue or HMRC along with a cover letter mentioning the key points (how much you earned, how much you paid in tax, how much you feel you are owed and why). You will then typically be sent a cheque within the next two month, often within one month.
Using a Tax Agent
The government website states that if all the contractors information is correct and provided in full, they will send you your cheque for the amount you are owed within 30 to 45 days. In the event that it reaches the 45 days point or even the 30 days, it may be worth getting in contact with the relevant tax office to discuss why your application has not been processed yet and if there is any way in which you can assist the process and get things moving a bit quicker. Again, the tax refund process can be a time-consuming and often unwanted hassle, which is why many contractors simply choose to hire a tax agent to take care of this for them and just wait for the cheque to arrive.