Beware of HMRC Tax Refund Changes
Published / Last Updated on 06/02/2024
HMRC suggests that when tax has been overpaid and you are due a refund, “you do not need to contact HMRC to make a claim”, it will be done automatically either by direct credit to your bank account or by cheque. This appears to have changed.
Timeline for Self Assessment
Tax Year 2022/23
- 31 January 2023 – Balancing payment due for previous tax year 2021/22 as well as your 1st Payment on Account for tax year 2022/23 (this is usually equivalent to 50% of the total of the previous tax year’s liability as HMRC assumes you will pay at least the same amount of tax in 2022/23 as you did in the previous tax year 2021/22).
- 31 July 2023 – 2nd Payment on Account for tax year 2022/23 (again equivalent to 50% of the total of the previous tax year’s liability), meaning you have now paid the equivalent of 100% of the previous tax year liability with only a balancing payment due if more tax is due.
- 31 January 2024 – Balancing Payment due for tax year 2022/23 if more tax is due over and above the payments on account you have made.
Tax Year 2023/24
- 31 January 2024 – 1st Payment on Account for tax year 2023/24 (equivalent to 50% of the total of the previous tax year 2022/23 liability)
- 31 July 2024 – 2nd Payment on Account for tax year 2023/24 (equivalent to 50% of the total of the previous tax year 2022/23 liability)
- 31 January 2025 – Balancing Payment due for tax year 2023/24 if more tax is due over and above the payments on account you have made.
Our Directors Experience Recently
The directors of this firm filed their self assessments returns for 2022/23 on 30 January 2024. Remember, 31 January is the latest date to pay your Balancing Payment for 2022/23 and your 1st Payment on Account for 2023/24.
Based upon payments on account already made, our directors were due tax refunds as taxable income was lower than expected in 2022/23 due to increased claimable investment property expenses. The directors still had to pay payments on account as normal when submitting self assessment returns on 30 January as it is for HMRC to subsequently confirm on or after 31 January that a tax refund is due and an adjustment to payments on account.
HMRC then automatically issued the full tax refund due as expected on 1 February 2024 for over paid taxes for 2022/23.
Unexpectedly, HMRC did not refund the overpaid Payment on Account (made on 30 January 2024) due for 2023/24 and kept this as a credit balance against the 2nd payment on account due on 31 July 2024.
Were you due a refund? Has HMRC paid it? Is HMRC holding a credit balance for your payments of account due for tax yar 2023/24 in July 2024?
HMRC Interest Rates
From 22 August 2023, HMRC interest rates are as follows:
- Late payment interest rate 7.75% pa.
- Repayment interest rate 4.25% pa.
Clearly, they are charging more for late payments and paying less on overpayments and refunds due.
Our directors made the decision to request the overpaid payment on account paid on 30 January for tax year 2023/24 given that you can earn higher than 4.25% interest currently elsewhere.
