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Tax Refunds After Redundancy: Claiming Your Cash Back – A Guide

Tax Refunds After Redundancy: Claiming Your Cash Back – A Taxfile Guide

July 22, 2025/in Redundancy, Tax, tax rebates, Tax refunds/by Taxfile

If you’ve recently lost your job and are wondering how tax refunds on redundancy payments work and are considering claiming back tax you may have overpaid, you’ve come to the right place. Being made redundant is a challenging time, both emotionally and financially. Amongst the many adjustments, understanding your tax position might feel like an unwelcome extra burden. However, here at Taxfile, we know that many individuals who experience redundancy are actually due a tax refund or tax rebate. So, we’re here to cut through the jargon and help you get back what you’re owed.

Why You Might Be Due a Tax Refund After Redundancy

The PAYE Puzzle

The UK’s Pay As You Earn (PAYE) system is designed for a consistent annual salary. When your employment ends part-way through a tax year (which runs from 6th April to 5th April), your employer has likely been deducting tax based on the assumption you’d earn that full year’s salary. This often leads to an overpayment and a potential tax rebate after redundancy.

Here’s why this “PAYE puzzle” often results in an overpayment:

Annual Tax Calculation: The Unfinished Year — Your Income Tax liability is calculated for the entire tax year. If your income stops or significantly reduces due to redundancy, your actual annual earnings will be lower than anticipated. This means you’ve paid too much tax upfront on income you ultimately didn’t earn for the full year.
Emergency Tax Codes: A Common Culprit — Sometimes, a final payment or even the redundancy payment itself can be processed with an emergency tax code (like 0T M1). These codes deduct tax at a higher, non-cumulative rate, often leading to a larger tax deduction than necessary. It’s a “better safe than sorry” approach by HMRC that often means you’re overpaying.
Income Below Personal Allowance: The Tax-Free Threshold — For the 2024/2025 tax year, most people have a Personal Allowance of £12,570 – this is the amount you can earn tax-free. If your total income for the year, including any taxable redundancy elements, falls below this threshold, you’ll have paid tax unnecessarily on earnings that should have been exempt.

Understanding Tax on Redundancy Payments

Unpacking Your Package

This is often the most confusing part, and it’s where many people miss out. Not all money you receive when leaving a job is treated the same way for tax. Knowing the difference is key to calculating your potential refund.

The £30,000 Tax-Free Golden Rule — The first £30,000 of your genuine redundancy payment (compensation for loss of employment) is completely tax-free. This is a significant benefit designed to help individuals during this transition.
What’s Taxable Above £30,000? Any portion of your redundancy payment that exceeds £30,000 is subject to Income Tax at your marginal rate. Crucially, this excess is not subject to National Insurance Contributions (NICs), which is an important distinction from regular earnings.
Other Payments That Are ALWAYS Taxable (Beware the “Hidden Taxables”) — Be aware that some payments in your redundancy package are always taxable as normal earnings, regardless of the £30,000 threshold. These include:
- Payment in Lieu of Notice (PILON) — Whether it’s contractual or non-contractual, money paid instead of working your notice period is subject to Income Tax and National Insurance.
- Accrued Holiday Pay — Payments for any untaken annual leave.
- Outstanding Wages, Bonuses, or Commission — Any pay for work you’ve already done or earned.
- Restrictive Covenants — Payments for agreeing not to work for a competitor, for example.

Taxfile Insight: It’s vital not to simply assume your employer has calculated everything correctly. Over or underpayments can occur, and it’s ultimately your responsibility to ensure you’re paying (and reclaiming) the right amount of tax. We’ve seen many cases where a simple check of the redundancy payslip reveals significant overpayments.

How to Claim Your Tax Refund

Your Options (And How Taxfile Can Help)

The method for claiming back tax after redundancy largely depends on your individual circumstances. Here are the common routes:

The All-Important P45 — Your employer must provide you with a P45 when you leave. This crucial document summarises your pay and tax deductions for the current tax year. Keep all parts safe – you’ll need Parts 2 and 3 for most claims!
If You Remain Unemployed (for 4+ weeks) and Don’t Claim Taxable Benefits:
- You can often get an in-year refund by completing a Form P50 (“Claiming tax back when you’ve stopped working”). You’ll send this to HMRC along with Parts 2 and 3 of your P45.
- Alternatively, you can claim your refund online via your HMRC Personal Tax Account – this is often the quickest and most straightforward route if you’re comfortable with online services.
If You Start a New Job Quickly (within 4 weeks):
- Hand Parts 2 and 3 of your P45 to your new employer. They should then adjust your tax code, and any overpaid tax should be refunded through your new salary via PAYE. It may take a couple of pay cycles to see the adjustment.
If You Claim Taxable Benefits:
- If you’re claiming benefits like Jobseeker’s Allowance or Carer’s Allowance (which are taxable), the Benefit Office will typically manage your tax refund as your benefits affect your overall tax position. You’ll need to send them Parts 2 and 3 of your P45. (Note: Universal Credit is generally not taxable, so you might still claim directly from HMRC if that’s your only benefit.)
HMRC P800 Tax Calculation (The Automatic Review):
- After the end of the tax year (which is 5th April, so typically summer 2025 for the current tax year), HMRC reviews PAYE records. If they identify an overpayment, they’ll send you a P800 tax calculation, explaining how to claim your tax refund. Important: Since May 2024, HMRC often requires you to actively claim your P800 refund online, rather than sending it automatically. Don’t miss this!
Self Assessment Tax Return (For Complex Cases):
- If your tax affairs are more complex (e.g., you’re self-employed, have significant other income, or need to declare certain payments that fall outside standard PAYE), you might be required or choose to file a Self Assessment tax return. Any overpaid tax would then be reclaimed through this comprehensive process.

Important Deadlines: Don’t Delay! You can generally claim a tax refund for up to four tax years after the end of the tax year in which you overpaid. For example, for the tax year ending 5th April 2021, the deadline to claim would have been 5th April 2025. Don’t leave money on the table!

Beyond the Refund: What Else Should You Consider After Redundancy?

While getting your tax refund is important, redundancy can open up other financial considerations:

Pension Contributions — If you received a significant redundancy payment, consider whether a portion could be paid into your pension. This can offer significant tax relief and boost your retirement savings.
New Employment & Tax Codes — Ensure your new employer uses the correct tax code from your P45. If you don’t have one, they might put you on an emergency code initially, which could again lead to overpayments.
Becoming Self-Employed? Redundancy often sparks a move into self-employment. If this is your plan, you’ll need to register with HMRC as a sole trader and understand your new tax obligations (e.g., Self Assessment, Class 2 & 4 NICs). Taxfile specialises in supporting self-employed individuals!
Income Protection/Benefits — Review any income protection insurance you have, or explore eligibility for state benefits to bridge the gap.
Financial Planning — This is an opportune moment to review your overall financial health, budget, and future goals.

Let Taxfile Take the Burden Off Your Shoulders

Navigating tax refunds after redundancy can be complex, especially during an already stressful period. At Taxfile, we have extensive experience helping individuals just like you claim back the tax they are owed quickly and efficiently.

Why choose Taxfile?

Expert Guidance — We understand the nuances of redundancy payments and tax codes.
Stress-Free Process — We can handle the paperwork and communications with HMRC on your behalf.
Maximise Your Refund — We ensure you claim everything you’re entitled to, avoiding common pitfalls.
Personalised Advice — Beyond the refund, we can offer guidance on your next financial steps, whether it’s understanding tax on a new job or navigating self-employment.

Don’t let overpaid tax remain with HMRC. Contact Taxfile today for a no-obligation chat about your redundancy tax refund. Let us help you claim your cash back and take one less worry off your plate.

020 8761 8000 Book Appointment Contact Us

Stay Ahead of HMRC Compliance Checks for CIS Contractors

April 23, 2025/in 2024-25, CIS, Construction Industry Scheme, HMRC, HMRC enquiry, HMRC investigation, Refund, Self-assessment, Self-employed, Sole traders/by Taxfile

By Ali at Taxfile.

As the new tax year approaches, CIS contractors must prepare for the upcoming 2024/25 tax return season. Last year we witnessed a significant increase in HMRC compliance checks delaying refunds, with many contractors being asked to provide detailed CIS pay/deduction slips and bank account transactions to verify their income.

At Taxfile, we are here to help you navigate these challenges and ensure your tax affairs are in order while offering you peace of mind with our unique HMRC investigation cover.

Why Are HMRC Compliance Checks on the Rise?

HMRC has ramped up its efforts to ensure compliance among CIS contractors, particularly focusing on verifying income and deductions. Last year, many contractors were caught off-guard when asked to provide:

CIS pay/deduction slips to confirm tax deductions at source.
Bank account transactions to prove income received from contractors.

Failure to provide these documents can lead to penalties, delays, and even full-scale investigations. With HMRC’s increased scrutiny, it’s more important than ever to ensure your records are accurate, complete, and readily available.

At Taxfile, we specialise in supporting CIS contractors with their tax returns and compliance needs.

How we stand out:

1. Expert Preparation of CIS Tax Returns

Our team ensures your 24/25 tax return is accurate, compliant, and submitted on time. We review your CIS pay/deduction slips, income, and expenses to minimise the risk of errors that could trigger an HMRC compliance check.

2. HMRC Investigation Cover is Included

Unlike other accountancy services, our invoices include HMRC investigation cover as standard. If HMRC decides to investigate your tax return, we’ll handle all the additional work required to represent you—at no extra cost. This means you’re protected from unexpected fees and stress.

3. Proactive Record-Keeping Support

We guide you on how to maintain proper records, including CIS slips, bank statements, and expense receipts, so you’re always prepared for an HMRC request.

4. Dedicated CIS Specialists

Our team understands the unique challenges faced by CIS contractors. We’re here to answer your questions, provide tailored advice, and ensure you’re fully compliant with HMRC regulations.

With HMRC’s increased focus on compliance, now is the time to act to ensure you get your refund sooner. We urge you to come prepared with your CIS deduction slips and your bank feed covering the period from 06/04/2024 – 05/04/2025.

Don’t let HMRC compliance checks catch you off-guard and delay your refund:

Contact Taxfile Today

020 8761 8000 Book Appointment Contact Us

Taxfile: accountancy and tax advice in Tulse Hill, South London.

Do I Need to Register for Self-Assessment?

April 5, 2024/in Accountancy, Directors, HMRC, Self-assessment, Self-employed, Tax returns/by Taxfile

by Mohamed at Taxfile.

In today’s guide, we look at the rules around whether or not you need to register for Self-Assessment and submit a tax return to HMRC each year. Let’s take a look.

Reasons to Register for Self-Assessment

You generally need to register for a Self-Assessment tax return if your income isn’t taxed at the source, meaning the tax isn’t automatically deducted from your wages/salary. Here are some common scenarios where you would need to register for self-assessment:

You are self-employed — sole traders, freelancers, and consultants typically fall under this category.
You receive rental income — if you earn income from renting out a property, you need to register.
You have a high income — employees earning over £100,000 per year need to register as their tax calculations may become more complex. (From 2023-24 you are only required to register if your income is above £150,000).
You have other income sources — this includes income from abroad, dividends, and partnership profits.

If you are still unsure about registration, please contact HMRC or call Taxfile on 0208 761 8000.

Registering for UK Taxes is Important

Registering for UK taxes is important for a few reasons, as we’ll explain below.

Firstly, it helps you avoid penalties. If you don’t register for Self-Assessment when required, you could face penalties from HMRC. These can be significant, especially if you’ve been earning income for a while without registering.

Secondly, it helps to ensure accurate tax payments. By registering and filing a Self-Assessment tax return, you ensure you’re paying the correct amount of tax. Without it, you might underpay and owe interest, or overpay and have to wait for a refund.

Thirdly, it helps you stay legally compliant. In severe cases, failing to register and pay your taxes can lead to legal action, including prosecution.

Registering also helps you maintain good standing with the Government. Being registered with HMRC shows you’re taking your tax obligations seriously. This can also be important if you’re applying for credit, a mortgage, or a visa.

Do Directors Need to Do a Self-Assessment?

Not all directors need to do a Self-Assessment tax return, but some do. Here’s a breakdown:

Directors with only PAYE income

If your only income from the company is through PAYE (Pay as You Earn), where tax is deducted at source, you generally don’t need to do a Self-Assessment.

Directors with additional income

If you have any other taxable income besides your salary, like dividends, company benefits, or income from another job, you likely do need to do a Self-Assessment tax return in order to report it.

However, even if you aren’t required to register, HMRC might still ask you to file a Self-Assessment return.

Learn more about director self-assessment here.

Why is Payroll Important for a Director?

Payroll ensures compliance with tax regulations. Directors are considered employees for tax purposes, and PAYE is the system used to collect Income Tax and National Insurance Contributions (NICs) from their salary. Running payroll ensures these deductions are made and reported correctly to HMRC.

Payroll creates a clear and accurate record of your director’s salary payments. This is important for tax purposes, but also for things like calculating benefits and pension contributions that might be tied to salary.

Being on payroll allows directors to qualify for certain benefits they wouldn’t get if paid through dividends alone. These can include enrolling in a company pension scheme and accruing National Insurance credits that contribute to your state pension.

Payroll ensures transparency by helping to maintain a clear separation between personal finances and the company’s finances. This is important for legal and accounting reasons.

While there might be tax advantages to structuring some of your director’s income as dividends, payroll remains a vital part of ensuring you’re following regulations and have a clear record of your director’s overall compensation.

Learn more about how to pay yourself as a director here.

Contact Taxfile – Accountants & Tax Advisors

Tax and accountancy help for South Londoners

If you need any accountancy help for your limited company or small business, Taxfile is here to help:

020 8761 8000 Book Appointment Contact Us

Are you in the South East or London? Taxfile has offices in Tulse Hill, and Dulwich, in South London.

Demystifying the SA302: Your Tax Summary Explained

March 25, 2024/in HM Revenue and Customs, HMRC, SA302, Self-employed, Sole traders, Tax calculation/by Taxfile

by Faiz at Taxfile

An SA302 is a document issued by HM Revenue & Customs (HMRC) that summarizes your income tax calculation for a specific tax year. It shows how your tax bill was arrived at, including your income from various sources, any deductions and allowances, and the final amount of tax owed or refunded.

An SA302 can be essential documentation in various situations. For instance, you might need it when applying for a mortgage, a visa, or a business loan, as it serves as proof of your income and tax obligations.

How & Where to Get an SA302

If you need a copy of an SA302 there are various ways of obtaining them:

• If you have done your tax return yourself via HMRC’s portal, you can log into your Government Gateway and download copies of them;
• If you have used an accountant that uses external software, then your accountant can provide you with the calculations. It’s worth noting that HMRC has a list of lenders that will accept the tax calculations from the accountant’s software. If your lender’s name is not on this link, then you or your accountant would need to contact HMRC and ask them to send you one. This can take up to 14 days to arrive via post.

Avoiding Errors & Information Mismatches

At Taxfile we receive a lot of SA302s for our clients that have been sent to us by HMRC. This happens when there has been some error or omission on a client’s tax return that was submitted and didn’t match what HMRC had logged on their system. To explain:

HMRC holds the following information about each taxpayer:

• Student loans;
• Private pension contributions;
• PAYE income;
• Jobseeker allowance;
• Child Benefit along with salary information (so, if one of the parents was on a salary of £60,000* or more, then HMRC will recover some or all of the benefit);
^{* (£50,000+ for the tax years 2023/24 and prior)}
• Registration for Class 2 National Insurance.

Because HMRC holds such information, our clients must check their tax returns carefully to ensure all the points mentioned above have been correctly covered and included in the tax return where appropriate. This is a crucial step when we provide the calculation and clients should also carefully read the declaration notes that are provided.

Tax or Accounting Problems?

Taxfile — help when you need it for tax and accountancy issues across South London

020 8761 8000 Book Appointment Contact Us

Taxfile are accountants & tax advisors in Tulse Hill, and Dulwich, South London.

Understanding Basis Period Reform for Self-Assessment Tax in the UK

December 21, 2023/in 2023, 2023-24, 2024, Accountancy, Accountants, Basis Period, Bookkeeping, Making Tax Digital, MTD, Partnership, Self-assessment, Self-employed, Sole traders, Tax, Tax accountants, Tax calculation/by Taxfile

Are you a sole trader or in a partnership?

Do you have different accounting dates from the standard 6th of April to the 5th of Apri?

If you answered YES to both questions, some IMPORTANT changes will apply for the tax year 2023-24.

The concept of the basis period determines the time frame used to calculate taxable profits or losses for self-employed individuals, partnerships, and some trusts. It marks a departure from the traditional “current year” basis, where business profits were taxed based on the accounting period ending within the tax year. Instead, it introduces a “tax year” basis, aligning taxable profits with the UK’s standard tax year, running from 6 April to 5 April. Read more

VAT in the UK: a comprehensive guide including what it is, the different rates, registering, returns, reclaiming it, the different schemes and more.

Navigating the VAT Landscape in the UK: A Comprehensive Guide

December 5, 2023/in Cash basis, Flat rate scheme, HM Revenue and Customs, HMRC, Making Tax Digital, MTD, Value Added Tax, VAT, VAT annual accounting, VAT cash accounting, VAT for retailers, VAT margin schemes, VAT returns/by Taxfile

Value Added Tax (VAT), a consumption tax levied on most goods and services in the UK, plays a significant role in the nation’s economy. Whether you’re a sole trader, limited company business owner or simply a curious consumer, understanding VAT is crucial for navigating the UK’s tax system effectively. Today’s comprehensive guide explains what it is, the various VAT rates, when you need to be registered for the tax, VAT schemes, and more. Read more

Deadline for Voluntary Insurance Contributions Extended to 5th April 2025

June 15, 2023/in 2023, Class 2 NICs, National Insurance, NI, NIC, NIC's, pension contributions, Pensions, State Pension/by Taxfile

The original deadline for buying National Insurance ‘credit’ was 31st July 2023, but you can now ‘buy’ incomplete years to boost your state pension until 5th April 2025. The extension was approved by the Government, giving HMRC more time to deal with the process.

You can view our original blog on what you need to do to plug the gaps in your National Insurance contributions here.

Boost State Pension by Plugging Gaps in National Insurance

April 21, 2023/in Class 2 NICs, National Insurance, NI, NIC, NIC's, pension contributions, pension scheme, Pensions, State Pension/by Mark

^{IMPORTANT: the video mentions the original deadline in April 2023. This has now been extended to 5th April 2025.}

Do you have gaps in your National Insurance record? If so, it could mean that you could get a lower State Pension when you reach state retirement age, particularly if you are aged between approximately 45 and 70 at the moment. Generally speaking, you need 10 years of contributions for a basic state pension and around 30 to 35 years for a full state pension. It does vary by circumstance though and, even with gaps, some people might have enough qualifying years for the full state pension already.

Urgently Check Whether You Have National Insurance Gaps

Our advice is to urgently check whether you do have any gaps in your National Insurance record. If so, in many cases it would be wise to make some one-off payments to plug any gaps for the years 2006 to 2016. However, there is limited time to do so despite the deadline for this opportunity having been extended from early April to the end of July 2023 [UPDATE: This has now been extended again to 5th April 2025]. Thereafter, the chance to fix all 11 years from 2006 to 2016 will be gone forever. Read more

TODAY is the deadline for submission of your tax return. Contact Taxfile for help filing & avoid a minimum £100 fine!

31st January was the Self Assessment Tax Return Deadline!

January 29, 2023/in 2021, 2022, Accountancy, Accountants, Deadline, HMRC, Self-assessment, South London, Tax accountants, Tax advice, Tax advisers, Tax returns, Taxfile, Tulse Hill/by Mark

[As at 1 February 2023]: The 31st January was the Self Assessment tax return and tax payment deadline. Miss the deadline and you’ll be in for a £100 HMRC fine right away. Interest will also be charged from 1 February, as usual, if tax is not paid by midnight on 31 January (rules apply). Time is short, so contact Taxfile for help with your tax return as soon as possible please. Book an appointment* with one of our helpful tax advisors and accountancy experts TODAY — we’ll make it easy!

020 8761 8000 Book Appointment Get Started Here

Key Takeaways from the Spring Statement 2022

March 24, 2022/in 2022, Accountancy, Accountants, Budget, Class 2 NICs, Class 4 NICs, National Insurance, NIC, Spring Statement, Tax, VAT/by Mark

The Chancellor Rishi Sunak unveiled his Spring Statement for 2022 on 23 March and in some ways it was more like a mini budget.

Key takeaways from the Spring Statement include:

The earnings threshold at which you start to pay National Insurance Contributions (NICs) will increase to £12,570 from July 2022. This is currently set at £9,880 (correct at time of writing, March 2022), so will leave people with more money in their pockets.
Class 2 NICs for the self-employed will also reduce, from April 2022, to zero for profits between £6,515 and £9,568
5p per litre has been cut immediately from fuel duty.
The basic rate of income tax will reduce from 20% to 19% starting in April 2024.
The Employment Allowance will increase to £5,000 per annum from April 2022. Currently it’s set at £4,000. The allowance reduces the NICs that employers have to pay.
VAT on materials that save energy will be reduced from 5% to zero from April 2022. This should reduce the cost of things like solar panels, heat pumps and insulation.
Councils in England will be able to pass on their share of an additional £500m in extra Government support via the Household Support Fund. The new tranche is for the period 2022/23. The fund helps vulnerable residents, via councils, with short-term help with things like fuel and household bills, food, clothing and other essentials. The previous tranche ends on 31 March 2022, so this is timely.

Watch the Chancellor’s 28 minute Spring Statement 2022, as delivered to the House of Commons, in the video above (skip any adverts). Alternatively get all the detail in the House’s briefing summary here. There’s also a Read more

Posts

Why You Might Be Due a Tax Refund After Redundancy

The PAYE Puzzle

Understanding Tax on Redundancy Payments

Unpacking Your Package

How to Claim Your Tax Refund

Your Options (And How Taxfile Can Help)

Beyond the Refund: What Else Should You Consider After Redundancy?

Let Taxfile Take the Burden Off Your Shoulders

Why Are HMRC Compliance Checks on the Rise?

At Taxfile, we specialise in supporting CIS contractors with their tax returns and compliance needs.

1. Expert Preparation of CIS Tax Returns

2. HMRC Investigation Cover is Included

3. Proactive Record-Keeping Support

4. Dedicated CIS Specialists

Don’t let HMRC compliance checks catch you off-guard and delay your refund:

Contact Taxfile Today

Taxfile: accountancy and tax advice in Tulse Hill, South London.

Reasons to Register for Self-Assessment

Registering for UK Taxes is Important

Do Directors Need to Do a Self-Assessment?

Directors with only PAYE income

Directors with additional income

Why is Payroll Important for a Director?

Contact Taxfile – Accountants & Tax Advisors

Tax and accountancy help for South Londoners

How & Where to Get an SA302

Avoiding Errors & Information Mismatches

HMRC holds the following information about each taxpayer:

Tax or Accounting Problems?

Taxfile — help when you need it for tax and accountancy issues across South London

Urgently Check Whether You Have National Insurance Gaps

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