Can I get a tax refund when I leave the UK?

Published on February 19, 2024
by Clark Stott

Clark Stott has been with Expat Tax Online since 2015. Being a dual national based in the UK, Clark has unique experience helping US citizens (and Accidental Americans) become tax compliant via the Streamlined Tax Amnesty program. Clark likes to help Americans in the UK keep their tax situations as simple as possible to avoid harsh IRS treatment.

Can I get a tax refund when I leave the UK?

It’s possible. If you’ve paid more tax than you owe during the tax year and you’re leaving the UK, you might be due a refund. This often applies to those who’ve been working in the UK and are either heading back home or moving to another country.

What exactly is a tax refund for individuals leaving the UK?

In the UK, taxes are usually taken out of your income throughout the year under the pay-as-you-earn (PAYE) system. If you leave the UK mid-tax year, there’s a chance you’ve overpaid your taxes, which could mean you’re eligible for a refund.

Who's eligible to claim a tax refund when leaving the UK?

If you’ve lived and worked in the UK, you might be able to claim a refund. It mainly depends on how much you earned and the tax you paid during the tax year. US expats who worked in the UK and plan to leave before the tax year ends could qualify. Other factors include whether you’ll work in the UK again within the same tax year and if you have any untaxed income.

Tax rules can get complicated, especially when you’re moving between countries. If you’re not sure about your tax situation, it’s a good idea to talk to a tax expert. They can give you personalized advice and make sure your taxes are sorted.

How does the UK tax system impact refunds?

The UK’s tax system is progressive, which means the more you earn, the more tax you pay. Residents are taxed on their worldwide income, while non-residents only pay tax on their UK income.

Your refund eligibility largely depends on your residency status, which the UK determines based on factors like how many days you spend in the country and your ties to it.

What do I need to do to claim a tax refund in the UK?

Claiming a tax refund involves a few important steps:

  • Consult a Tax Professional: They can offer specific guidance, help you follow tax rules, and maximize your refund chances.
  • Figure Out Your Residency Status: This affects your tax obligations and refund eligibility.
  • Look at Your Income and Tax Paid: Check your earnings and the tax you’ve paid, usually shown on your P60 or P45 forms.
  • File a Tax Return if Needed: If you have untaxed income, you might need to file a self-assessment tax return.
  • Claim Your Refund: You can do this through HM Revenue and Customs (HMRC), either online or with a paper form.
  • Wait for HMRC’s Review: After you claim, HMRC will check your details and process your refund, which can take a few weeks.

Can I get a refund on my National Insurance Contributions?

Generally, National Insurance Contributions (NICs) aren’t refundable, but there are some exceptions:

  • Overpayment: If you’ve paid more NICs than needed in a tax year, you might get a refund.
  • Leaving the UK: If you’re moving out of the UK to a non-EU country, you could be eligible for a NIC refund, depending on how much you’ve contributed and your specific situation.


To claim a NIC refund:

  • Check Your Contributions: Review your National Insurance record for any overpayments.
  • File a Claim: Contact HM Revenue and Customs (HMRC) with the necessary documents to start your refund claim.

Understanding NIC refunds can be tricky, especially for US expats not used to the UK tax system. A tax professional can clear things up, guiding you through the process and making sure you’re taking full advantage of any refund opportunities.

How do pensions and savings affect my tax refund in the UK?

Pensions and savings play a big role in your UK tax refund situation, especially for US expats:

  • Tax on Pensions: UK pensions are usually taxed upfront. The tax amount depends on your total income and tax status.
  • Savings Interest: Interest from savings is taxable, with your allowance based on your income tax band.
  • Claiming Refunds: If you’ve overpaid tax on your pension or savings interest, you might be due a refund. This often happens if too much tax was deducted or if your circumstances have changed.

What are the departure formalities for tax clearance in the UK?

When you’re ready to leave the UK, there are a few tax-related steps to take:

  • Notify HMRC: Let HM Revenue and Customs know you’re leaving by filling out a P85 form. This helps them figure out if you’re owed a tax refund.
  • Final Tax Assessment: HMRC will review your taxes and tell you if you owe money or are getting a refund.
  • Settle Any Outstanding Taxes: If you owe taxes, it’s important to pay them before you leave. On the flip side, if you’re due a refund, HMRC will process it after they’ve completed your final tax assessment.

 

For US expats, dealing with both UK and US tax systems can be a complex affair due to their distinct differences. However, getting help from a tax professional can make this process much smoother. 

They offer invaluable assistance by providing tailored advice, ensuring you comply with all tax regulations, and helping you maximize any refund opportunities. Their expertise can be particularly beneficial in navigating the intricacies of cross-border taxation and ensuring that you leave no stone unturned in your tax obligations.

What should US expats keep in mind about UK taxation when leaving?

As a US expat preparing to leave the UK, it’s crucial to:

  • Understand Your Tax Obligations: Be clear about your tax responsibilities in both the UK and the US This includes understanding how your income, pensions, and savings will be taxed in both countries.
  • Plan for Tax Implications on Future Income: If you have ongoing income sources from the UK, such as rental income or business profits, understand how these will be taxed after you leave.
  • Consider the Impact on Your US Tax Return: Remember that your global income may still be reportable and potentially taxable in the US, and consider how your UK tax situation might affect your US tax return.

 

With the right preparation and professional guidance, you can ensure a smooth transition and avoid any unwelcome tax surprises. Whether it’s claiming a refund, understanding your ongoing tax obligations, or ensuring compliance with both UK and US tax laws, a tax professional can provide the expertise and support you need to manage your finances effectively as you transition to your next adventure.

The information provided herein is for general informational purposes only and should not be considered professional advice. While we aim to provide helpful and accurate information, we make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained here or linked to from this material.

Always get professional advice from a US international tax specialist.