Taxpayers Urged to Check for £8.9 Billion in Overpaid Income Tax

Taxpayers in the United Kingdom are being advised to review their self-assessment tax returns as over two million individuals may have collectively overpaid an estimated £8.9 billion in income tax during the 2024/25 tax year. The deadline for self-assessment returns, which falls on 31 January 2026, is approaching, prompting concerns about potential financial refunds for those who may not be aware of their overpayments.

The self-assessment tax system requires individuals to report their income and calculate their tax obligations independently. This year, taxpayers are also mandated to make their first payment on account by the same deadline. This payment system, which is based on the previous year’s tax bill, can inadvertently lead to significant overpayments, as noted by accountants from UHY Hacker Young.

Under the payment on account system, individuals must estimate their tax liability for the upcoming year, dividing their previous year’s tax into two advance payments. For instance, if a taxpayer’s bill for the 2024/25 tax year was £4,000, they would be required to pay a total of £6,000 by the deadline, which includes the forthcoming payment on account for the 2025/26 tax year. This approach can result in overpayments if an individual’s income decreases, as their tax payments are based on potentially inflated previous earnings.

Neela Chauhan, a partner at UHY Hacker Young, highlighted the issue, stating, “Self-assessment is supposed to ensure people pay the right amount of tax, but for millions, it means they are being overtaxed by billions of pounds.” The firm estimates that approximately 2.6 million taxpayers have overpaid income tax through this system, with many likely unaware that they are eligible for a refund.

Claiming a tax refund can be a complicated process. Overpayments made through self-assessment are not automatically corrected by HM Revenue and Customs (HMRC). Taxpayers must identify any errors and formally request a refund themselves. Common mistakes include inaccurately reporting income or failing to claim valid business expenses, such as travel costs or supplies, resulting in tax being paid on non-existent profits.

To assist taxpayers, UHY Hacker Young emphasizes the importance of meticulousness when completing self-assessment forms. Chauhan remarked, “Self-assessment taxpayers must check whether they have paid the correct amount. Refunds are not automatic, and HMRC will not proactively inform you that you’ve paid too much.”

How to Navigate the Tax Refund Process

Taxpayers who suspect they have overpaid can initiate a tax refund claim. However, it is important to note that refunds may not be issued if there is tax due within the following 45 days, as the amount may simply offset future liabilities.

For those who submitted their self-assessment return online, they can log into their account to confirm they completed the relevant section on overpayments. If this section was filled out, the refund is usually processed automatically. If not, a manual claim can be submitted through their online account or by contacting HMRC directly.

HMRC typically processes refunds within two weeks of an online submission or the date indicated on a tax calculation letter (SA302) for paper returns. Nevertheless, delays are common due to backlogs, with some taxpayers reporting waits of up to 18 to 24 months to receive their refunds.

Chauhan stresses the urgency of reviewing tax returns and acting promptly when overpayments are identified. “If you don’t check your return carefully and follow up, you may never see that money again,” she warned. She added, “Any overpaid tax is essentially a low-interest loan to HMRC, so it should be chased up as quickly as possible.”

Taxpayers should also be vigilant about fraud. HMRC does not send details of tax refunds via email, and any suspicious emails should be reported to the authorities to ensure personal information remains secure.