Registering with HMRC for an online personal tax account

Consider registering with HMRC for an online personal tax account at www.gov.uk. Having a personal tax account with HMRC allows you to do various tax matters online. You can reclaim overpaid tax, amend your personal details, check your tax code, etc. It is easy to do and can be set up using the following link:

Personal tax account: sign in or set up – GOV.UK (www.gov.uk)

Tax rebates

Individuals have an annual tax-free allowance of £12,570 per annum. If you earn less than this amount during a tax year you will not pay tax. The tax code is cumulative, and you can earn £1,047.50 per month tax-free.

Individuals who only work for part of a tax year, for example, students may be due tax rebates from HMRC. If you work for the first four months of a tax year and are unemployed for the remainder of the tax year, you may be due a tax rebate. This is because your personal allowance is only used for the first four months of the year with the remainder of the allowance being unused.

To illustrate this, if you earn £1,500 per month from April to July in a tax year, you will pay tax of £362. Your total earnings for the year will be £6,000 which is below the personal tax allowance, meaning you will be entitled to a tax rebate of £362. This rebate can be claimed online, via a personal tax account with HMRC.

Someone starting work later in the tax year will carry forward their monthly cumulative tax-free amounts. For example, someone starting work in August will have a cumulative tax allowance of 4 months or £4,190. Once the cumulative earnings exceed this amount tax will be payable.

Calculate tax rebates

Keeping all your payslips will help you calculate tax rebates that you may be due. At the end of the tax year, which is 5th April, add all your earnings and tax paid across all employments. Your final payslip from the tax year and P60 should include details of the cumulative tax you have paid. If your earnings are below the tax allowance of £12,570, your tax code is 1257L and you have paid tax, you may be due a rebate. If your earnings exceed the personal tax allowance, deduct £12,570 from your earnings, and multiply the remaining amount by 20%. This will give you the amount of tax you should have paid. If you have paid more than this amount in tax, you may be entitled to a tax rebate.