It is reasonable to assume that if a person pays too much tax, HMRC will automatically send the overpayment back to them. Unfortunately, this is not the case, and where a taxpayer is due a tax refund, they may need to claim it.
Why an overpayment may arise
There are various reasons why a person may pay more tax than they need to. For example, where a taxpayer is in Self-Assessment and makes payments on account, if their circumstances change and their income falls, they may have paid more than they need to. An employee may pay too much tax if they have been given the wrong tax code, or if they have only worked for part of the tax year and not had the benefit of their full personal allowance.
Determining if you have overpaid tax
There are various routes by which a tax overpayment can come to light. For example, taxpayers who do not complete a Self-Assessment tax return and have paid too much tax will receive either a P800 calculation or a Simple Assessment letter. These are normally sent out between June and March following the end of the tax year. The letter will tell them that they have paid too much tax and how to claim a refund. If the taxpayer is within Self-Assessment, they will not receive a letter. However, they may find out that they have overpaid tax when they complete their Self-Assessment tax return. However, if HMRC’s return software is used to complete the return, remember the tax calculation does not take into account any payments that have already been made, and when these are deducted from the amount that the taxpayer owes, it may become clear that the taxpayer has paid too much.
A taxpayer can also check whether they have paid too much by looking at their personal tax account online or via the HMRC app.
Claiming a tax refund
Where a taxpayer needs to claim a tax refund, there are various ways in which this can be done. A claim can be made online using the tool on the Gov.uk website at claim tax return. A tax refund can also be claimed through the taxpayer’s personal tax account or via the HMRC app. The refund will normally be made within five days of making the claim online.
If the tax calculation letter tells the taxpayer that they will receive a cheque, they do not need to claim a refund. The cheque will normally be sent within 14 days of the date on the letter.
Where the taxpayer is within Self-Assessment, HMRC may not issue a tax refund if a tax payment, for example, a payment on account, is due within 45 days. Instead, they will set the refund against the next tax bill.
Interest is paid on overpaid tax at a rate of 1% below the Bank of England base rate, subject to a minimum level of 0.5%.
If you have overpaid tax, feel free to get in touch with us for a FREE INITIAL CONSULTATION for claiming a tax refund!
