Losing your job can be a distressing experience. And concerns about your finance suddenly become a reality. However, there are steps you can take to ensure you get through this period of unemployment by staying busy, actively looking for work, and finding out what financial help your local jobcentre can provide you with.
Becoming unemployed changes many things about your tax situation – and you need to bear in mind that unemployment benefits are taxable and have to be reported in your tax return as a form of income. How much taxes do I have to pay for unemployment? Read on…
Unemployment Benefit Taxing Choices
You have a choice of how you pay tax on unemployment compensation you receive from the government. You can estimate tax owed and pay each quarter – or you can withhold paying any taxes above the flat rate of 10% which will automatically be deducted.
You’ll need to estimate your tax liability for the year as closely as possible to ensure you make the right payments at the right time as you may be subject to charges if you underpay or miss any deadlines.
Withholding allowances will be calculated on a form provided and will take into account any personal exemptions that you and your spouse were entitled to claim as a taxpayer, alongside the number of dependants prior to the 2018 tax year.
You can change these calculations at any time during the tax year depending on changing circumstances. These include:
- You lose any secondary source of income
- You experience major changes such as divorce, the birth of a child or death of a spouse
- You qualify for less or more tax deductions, credit, or adjustments to income
If you didn’t owe any income tax in the last year and you’re not expected to owe any in the current year you may be exempt from withholding – but remember if calculations are inaccurate you may owe a substantial amount of money at the end of the year.
However, you choose to pay your taxes you’ll receive an unemployment tax form listing your entire compensation for the year to enable you to fill in your tax return accurately.
HMRC Tax Rebates
HMRC unemployed financial help may come in the form of a tax refund if you’ve been unemployed for at least four weeks. You’ll need to contact them to find out what information you need to provide alongside sending them parts 2 and 3 of your P45.
HMRC self-employed tax if you’ve lost out on income or had to stop working to look after someone will still have to be paid on any monies that you may be entitled to on the Self-Employment Income Support Scheme.
Need Professional Help?
If you have any questions or need any tips on paying taxes when you’re unemployed simply contact a trusted company specialising in tax compliance and tax planning. Dedicated accountants will ensure any self-assessment taxation and responsibilities will be handled properly and on time. There’s no obligation and quotes are free.