Unexpected tax return

I’ve been back in the States and off UK payroll for nearly a year and a half. But because of the quirks of the UK taxation calendar, I ended up having had worked part of the 2009-10 tax year in the UK, for which the returns were due this coming Monday.

I sat down today to file that return, somewhat dreading that I’ll find my taxes underpaid and will have to fork over a few pounds sterling. In my previous years, I’ve never had to pay more than a few hundred with my return, but nowadays, with my remaining UK-based funds being largely symbolic, it would involve a scramble of wiring money over and making a payment right on the deadline. (I’ll be honest: I completely forgot that I still had to do it this year; I could have missed the deadline altogether if not for a friendly reminder from the Her Majesty Revenue and Customs, which arrived in my mailbox yesterday, having been mailed on December 16th.)

As I described in this post a year ago, the entire tax self-assessment process takes maybe fifteen minutes online, with a return as simple as mine – here’s how much I earned, here’s how much they withheld, no other deductions or increases, tell me how much I owe. But when I clicked on the final screen button to take me to the calculation, I was very pleasantly surprised.

It turns out that the British government owes me a neat four-digit refund. Sterling.

The calculation showed that I should have had a considerably smaller tax amount withheld from my paycheck than in fact was. Given that I worked for roughly the third of the tax year in the UK, I see two plausible explanations. First, my withholding may have been at the rate aimed at my entire yearly salary, and not commensurate with the final amount that was three times smaller. Second, tax brackets were adjusted in the UK within last year or so; my partial-year income may have qualified me for a lower bracket than when the salary was paid.

In any case, I just had a small bag of money fall into my lap from the sky. No complaints here.