Self-assessment taxpayers in the UK are estimated to have overpaid £8.9bn ($12.18bn) in income tax last year, according to research by accountancy practice UHY Hacker Young.
The company said that a major factor is the Payment on Account system, which requires many self-assessment taxpayers to make advance payments based on the previous year’s tax bill.
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If their income falls, these instalments can exceed the tax actually due, resulting in substantial overpayments.
HMRC data provided to UHY Hacker Young suggests that around 2.6 million people paid too much tax through self-assessment.
The company noted that many may be unaware they are owed a refund.
HMRC does not automatically correct self-assessment overpayments.
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By GlobalDataTaxpayers must spot the issue themselves and actively apply for a repayment.
UHY Hacker Young added that basic mistakes when completing returns are another frequent cause of overpayment.
Errors can include entering an incorrect salary figure or failing to claim all legitimate business expenses such as travel or supplies, which can leave individuals paying tax on income that does not represent real profit.
The company urged taxpayers to take particular care when filling in self-assessment forms and to seek professional advice if they are uncertain about any part of the process.
It also warned that HMRC backlogs mean repayments of overpaid tax can be delayed, with some taxpayers reportedly waiting between 18 and 24 months to receive their money.
Neela Chauhan, partner at UHY Hacker Young, said: “Self-assessment taxpayers must check whether they have paid the correct amount. Refunds are not automatic and HMRC will not proactively tell you that you have paid too much.
“If you don’t check your return carefully and follow up, you may never see that money again. There are even cases where taxpayers have identified overpayments and HMRC are unnecessarily withholding money, which is causing people a lot of undue stress. Any overpaid tax is essentially a low-interest loan to HMRC so should be chased up as quickly as possible.”
UHY Hacker Young is an accountancy network with 96 partners and 720 staff across 20 UK offices, offering accounting, tax and business advisory services.
