The annual tax settlement is the easiest way for employees to have their payroll tax settled through their employer and to get back any overpayment of allowances and deductions. In this article, we explain who can apply for an annual settlement for 2025 and when you need to file your tax return.
The annual settlement in 2026 (for 2025) will be made by your last employer if you were not obliged to file a tax return (typically no concurrent employment, no business/rental, etc.). The application + documents must be delivered to the employer no later than Monday 16 February 2026. The employer will make the annual settlement no later than 31 March 2026 and pay the overpayment of more than CZK 50 no later than 30 April 2026.
The annual tax settlement is an annual recalculation of advance payments of employment tax. During the year, your employer deducts monthly tax advances. However, in practice, discounts and deductions often only come together at the end of the year – for example, you bring in receipts for donations, pension savings or loan interest, or your family situation has changed during the year.
That’s why there’s an annual settlement: your employer recaps the whole year, recalculates the tax and makes up the difference. If you paid more, you’ll have overpaid. If you paid less, there is an underpayment (which is usually deducted from your wages).
Not sure how to do your taxes correctly so you don’t get it wrong? We can help you navigate the law, whether it’s dealing with a specific tax situation, preparing for an audit by the tax authority or defending yourself in court.
An employee who is not required to file a tax return can request an annual tax return. But it’s the “who doesn’t have to” that’s where most of the confusion lies – and also the most common reason why a payroll accountant will tell you, “We can’t do an annual return for you, you have to file a return.”
The annual tax settlement (properly the annual settlement of advances and tax credits) is a mechanism designed primarily for employment income. In practice, this means that your employer will make an annual tax settlement if you have given them a timely request for an annual tax settlement of advances and tax credits, and at the same time, you are not obliged to file a tax return because of your income and circumstances.
Typical situations in which you will benefit from the annual tax settlement:
Important detail: if you have changed employers during the year, the last employer will usually do the annual return, but you must provide them with a certificate of taxable income from the previous ones (otherwise they have nothing to put the year together properly). This is also a practical reason to ask for the certificate in time when you leave your job.
If you’ re not sure whether your situation still falls within the scope of the annual tax return (typically overlapping employment, secondary self-employment, renting, abroad), we recommend a short consultation with our tax legal advisors – we can help you choose the right course of action and prepare your documents so that they will stand up to scrutiny.
It’s okay for the annual return if you’ve changed two or three jobs during the year. What typically matters is that you had overlap.
Overlapping means that you had two payers of income from jobs that charged you wages in one period (typically one month). In layman’s terms: you had two jobs at the same time, even if only briefly, or you started a new job before the end of your notice period at your old job.
Why is this a problem? Because it’s easy to arbitrage the application of discounts and monthly taxation in a concurrent payroll, and then the law typically requires you to make a final settlement via a return.
A tax return must be filed by an employee whose annual taxable income exceeds £50,000, unless it is exempt income or income taxed by withholding at a special rate.
But it’s not just the limit for employees – in practice, you will often be obliged to file a return because of combinations of income and situations that the employer has no way of correctly accounting for in the annual return. Typically, these cases are:
Now the good news. There are some incomes that can be settled when you are paid, because tax is withheld. Withholding tax means that the payer of the income deducts the tax straight away and you don’t have to add it up anywhere.
A typical example is a work performance agreement (WPA) where you do not sign a taxpayer declaration and the remuneration is taxed by withholding. In this case, it may be the case that it does not disturb your annual reckoning because the tax on the DPP has already been paid at source and the law treats it differently from advance tax.
But beware of two things that make a mess in practice:
Imagine you worked for employer A from January to June and employer B from July to December. You had no business or lease. In that case, you can usually just give Employer B an application for the annual tax return and bring a receipt from Employer A.
Another example: you worked for your employer all year, but from September you started invoicing as self-employed on the side. In this case, your employer can clear your wages, but it won’t clear your total tax liability without a return. Therefore, you will end up with a tax return.
Another typical coincidence: you had two jobs in December because you earned extra money working part-time. If the part-time job ran as a DPP with withholding tax, you can still do the annual return. However, if it was a classic employment relationship or an agreement with advance tax, this will already be grounds for a return.
Are you due to file a tax returnthis year? Find out what deadlines to watch out for.
As we are dealing with the annual tax settlement for the 2025 tax year, February 2026 is crucial.
The point of the annual settlement is that the payroll office needs to have all the supporting documents you want to claim on time (for example, receipts for donations, pension savings, loan interest, or documents for child tax credit or other allowances). You must therefore provide your employer with the supporting documents for the annual tax return by the deadline.
And if you’ve changed employers during the year, there’s one more important document: a taxable income certificate from your previous employer. Without it, the last employer has nothing to correctly calculate the entire year.
If you don’t submit your application (and supporting documents) on time, your employer won’t do your annual tax return. In this situation, the most common thing to do is to switch to a tax return.
If your employer doesn’t do your annual return (e.g. due to missing documents or overlapping), we can help you quickly assess the situation with tax legal advice and suggest next steps.
The employer must calculate and conclude the annual return for 2025 by 31 March 2026 at the latest. If it results in an overpayment, it is refunded to the employee no later than the March 2026 wages (typically paid in the April pay period) – and usually only if the overpayment is more than £50. Conversely, any underpayment is not deducted from the employee’s annual statement.
This is the form you use to ask your employer to make an annual payroll tax settlement and claim your allowances and tax credits. In the request , you state the facts on which your employer will judge whether they are allowed to make the annual settlement at all (for example, whether you have had overlapping jobs, whether you provide certificates from previous employers, what allowances you claim, etc.).
For the 2025 tax year, the form MFin 25 5457/B, model 4, is used.
Now for the practical issue that burns you the most: how to fill in the application for annual tax settlement so that the payroll office does not have to return it for completion and can make the annual settlement at all It is important to remember one thing: although the employer handles the annual settlement for you, the responsibility for the accuracy of the data and the timely submission of supporting documents lies with you. Therefore, you need to fill in the form correctly and provide the necessary supporting documents.
First of all, it must be clear who is applying and with whom the annual accounts will be made. For you, this means filling in the identification details correctly (name, birth number, date of birth, address). For the employer, this means identifying the taxpayer.
If you have changed jobs, complete the section on previous taxpayers and provide proof of income. Without a taxable income certificate from your previous employer, your last employer has no way of calculating your annual tax bill correctly. Therefore, ask for the certificate in good time (preferably when you leave your job) and attach it to your application.
Another important part is tax credits and allowances. Most overpayments don’t arise on their own, but just because you document claims that weren’t fully claimed during the year, or you didn’t start claiming them until later. In practice, these are mainly child tax credits (and possibly bonus tax credits (typically a spouse’s allowance if you qualify) and tax-free parts of the tax base (gifts, pension savings, life insurance, interest on a home loan, etc.).
There is always a simple principle: you have to prove what you want to claim. Therefore, in practice, the application is accompanied by receipts and certificates from institutions (bank, pension company, insurance company, recipient of the gift).
From a data protection perspective, the principle that personal data should be adequate, relevant and limited to what is necessary in relation to the purpose of the processing (the principle of minimisation) applies.
The practical impact is simple: an employer typically only needs to see what proves entitlement (identification of the contract, the period, the amount, possibly the purpose for a home loan), not everything around it. Therefore, if you are submitting a copy of a document that clearly contains redundant information, it is usually wise to stick to minimisation: document what is needed and leave the rest aside.
Not sure how to do your taxes correctly so you don’t get it wrong? We can help you navigate the law, whether it’s dealing with a specific tax situation, preparing for an audit by the tax authority or defending yourself in court.
Sometimes your tax has worked out a certain way over the course of the year, and then suddenly an overpayment (or underpayment) appears in your annual tax return, which can be confusing. But there’s a reason for this: during the year, tax is calculated monthly on what’s been accounted for in that month, whereas the annual return makes one big final comparison for the whole year.
During the year, your employer calculates your payroll tax on a monthly basis, using the monthly rebate ratios (if you have a signed declaration with your employer). The annual return then takes the whole year together and checks that the advances you have paid match what comes out after the annual rebates and deductions have been applied.
The most common mystery tends to be the basic taxpayer discount. In layman’s terms: it’s the amount by which your annual tax can be reduced (for employees, it’s reflected in net pay, typically on a monthly basis). For 2025, this is an annual allowance of £30,840, equivalent to a monthly claim of £2,570.
Now the important bit: you are entitled to the basic annual allowance even if you didn’t work for part of the year (i.e. had no taxable pay), you just didn’t have the allowance to deduct during the nil months. That’s why it’s often then only claimed in the annual return against tax paid in the months when you did have pay.
Typical scenario: you work for part of the year, are on sick leave for part of the year or have a long break between jobs. During the months you were working, your employer was deducting advance tax. In the months when you received sickness benefits, no tax is due on them because they are not taxable income.
What happens at the end of the year? You have only paid tax on part of the year, but the taxpayer’s allowance is applied to the annual total. The result may be that the annual return will overpay you because the advances paid were more than the annual tax after the allowances have been applied.
The annual settlement can also end up with an underpayment – typically if you have claimed discounts during the year in a way that later turns out to be unjustified (for example, incorrectly documented conditions for some discounts), or if your circumstances changed during the year and the payroll accountant did not take this into account in time.
In practice, withholding tax is confused with two different things – and this is where a lot of misunderstandings arise:
The good news is that some earnings subject to withholding tax do not in themselves block the annual return. Typically, this is a situation where you did not have a signed declaration with the DPP and the remuneration was taxed by withholding. In this case, the annual settlement with the main employer can often be done as standard.
However, the reverse is also true: if you don’t meet the conditions for an annual statement, your employer simply won’t do it after the end of the year – and you then have to deal with the situation in another way (typically via a tax return).
Importantly, you can also choose to voluntarily include some income subject to withholding tax in your tax return – typically when it’s worth claiming allowances and getting an overpayment. In other words, withholding taxes are not always final.
By Monday 16 February 2026 at the latest, and deliver all documents by the same date.
On the website of the Financial Administration: MFin 25 5457/B, model No. 4 or in paper form at branches.
Usually the most recent employer, but you must provide proof of income from previous employers.
The overpayment above CZK 50 is to be paid by 30 April 2026 at the latest.
Often not, unless you are required to file a return for another reason.
Your employer won’t do an annual tax settlement and you have to deal with your tax obligations in another way (typically by filing a tax return).
Not sure how to do your taxes correctly so you don’t get it wrong? We can help you navigate the law, whether it’s dealing with a specific tax situation, preparing for an audit by the tax authority or defending yourself in court.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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