Tax is rarely simple, and if you’re self-employed, it can be easy to overpay without realising. Whether your income dipped, your expenses weren’t fully claimed, or you made an honest mistake on your return, here’s what to do if you think you’ve paid too much and how to claim it back.
There are a few common reasons why self-employed people might end up overpaying tax. One of the most frequent is when your income ends up being lower than expected, but your payments on account (the advance payments HMRC asks for based on last year’s tax bill) were based on a higher figure. If your earnings drop significantly, this can lead to you paying more than you owe.
You might also overpay if you’ve made a mistake on your tax return. For example, by overstating your income or forgetting to claim allowable expenses. This is just one of the reasons good record-keeping is so important!
Yes, HMRC does refund overpaid tax. If you overpay through the Self Assessment system, HMRC will usually issue a refund automatically once your tax return is processed. You’re able to state in your tax return how you’d prefer to have any money you’re owed paid to you; either directly into your bank account, or by cheque.
If you have upcoming payments on account in the next 45 days (e.g., for the next tax year), HMRC may apply your overpayment to those instead of refunding it.
In some circumstances, you may need to prompt HMRC to issue a refund. For example, if the amount is small, or if you haven’t stated how you’d like to receive payment on your tax return. If you file your tax return online, you can prompt a repayment by logging into your HMRC digital services account and clicking ‘Request a repayment’.
Read more: Six Tips to Complete Your Self Assessment on Time, Every Time!
If you realise you’ve made a mistake on your tax return, you can usually correct it by submitting an amended tax return to HMRC. This can be done online if you filed your original return digitally (using the portal where you originally submitted your Self Assessment), or by paper if you submitted it that way. Remember, though, if you want to amend a tax return, you’ll have to provide supporting evidence as to why you’re making the change.
Generally speaking, tax returns can only be corrected up to 12 months after the Self Assessment deadline for the relevant tax year. However, if you believe you have overpaid tax, you may be able to claim overpayment relief beyond this 12-month window.
Overpayment relief allows you to request a refund for tax paid in error or over and above what you owe, even if the usual deadline for amendments has passed. To qualify, you’ll need to provide evidence, and you should make your claim as soon as possible. Keep in mind that HMRC may take longer to process these claims, and the rules can be more complex, so it can be a good idea to get professional advice if you think you’re eligible.
Once you’ve submitted your return or amended it and requested a repayment, HMRC will usually take a few days to a few weeks to process it. If you’re due a repayment and haven’t received anything after a few weeks, it’s worth logging into your HMRC account to check the status, or giving them a call.
If HMRC is applying your overpayment to future tax liabilities instead, this should be clearly shown in your account as a credit.
HMRC bases your Payments on Account on your previous year’s tax bill, essentially assuming your income and circumstances will stay the same. But if your situation changes, that estimated amount might be too high.
For example, you may end up owing less tax if:
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