Tax dodge of the week: avoid paying during a career break

Millions of us unwittingly pay more tax than we need to, says Steve Lodge in the FT. The National Audit Office recently reported that we may have been paying £340m a year too much through the PAYE system and that processing errors left more than half a million taxpayers £290 out of pocket in 2006-2007.

Then there are the mistakes we all make: failing to reclaim tax deducted at source from savings accounts, erroneous entries on tax returns and, for higher-rate taxpayers, failing to claim the 18% tax rebate on pension and Gift Aid contributions.

One area that is often overlooked is the career break, says Mike Warburton in The Daily Telegraph. If you are in the PAYE system and take a year off, it is very likely that you will have overpaid tax in that year and be entitled to a repayment.

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In the year of your return, you may also end up paying too much tax as it is and your employer may well have to use an emergency code number or operate on a one-month basis. You can apply for the refund via your end-of-year tax return or by filling in form P50.