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Understanding Overpayment Relief

February 21, 2024/in Overpayment Relief, Tax overpayment/by Taxfile

by Mohamed at Taxfile.

Have you ever felt that you’ve paid more in taxes than necessary? Whether due to calculation errors, changes in personal circumstances, or evolving tax laws, overpayments can happen to anyone. The good news is that there’s a way to reclaim those excess funds through the process of overpayment relief claims. In this comprehensive guide, we’ll walk you through the ins and outs of reclaiming your hard-earned money.

What is Overpayment Relief?

Overpayment relief allows you to recover money you’ve mistakenly paid to HMRC within four years after the end of the tax year in which the overpayment occurred. It’s a financial safety net that allows you to correct discrepancies and regain control of your finances. Understanding the concept is the first step toward putting your overpaid taxes back where they belong – in your pocket.

Types of Overpayment

The overpayment must be for income tax, capital gains tax (CGT), Class 4 National Insurance contributions (NICs), or corporation tax. It applies to both overpayments and excessive assessments.

Eligibility Criteria

You must have a valid reason for believing you overpaid tax. This could be an error in your tax return, incorrect coding by HMRC, or changes in your circumstances affecting your tax liability. You cannot claim overpayment relief simply by correcting your tax return after the deadline.

Claiming Overpayment Relief

You need to submit a formal claim to HMRC in the correct format, explicitly stating that it’s for “overpayment relief.”

The claim should clearly identify the tax year, the amount you believe you overpaid, and the reason for the overpayment. Include any supporting evidence, like documents confirming income, deductions, or expenses. Your claim must be submitted within specific time frames — generally, four years from the end of the tax year for which you’re claiming. Special rules apply for late claims.

Claim Format

Your claim must be made in writing, stating the tax year, the amount overpaid, the reason for your claim, and whether you’ve previously appealed. You cannot claim through your tax return.

For more information please refer to the HMRC website or get in touch with Taxfile.

Tax & Accountancy Help from Taxfile

At Taxfile we are skilled at identifying opportunities for additional savings, deductions, and credits that individuals might overlook. You can call us on 020 8761 8000 to schedule a free 20-minute, no-obligation consultation for any tax-related matter — or simply use the buttons below:

020 8761 8000 Book Appointment Contact Us

Taxfile is a tax advisor and accountant in Tulse Hill at 25 Thurlow Park Road, Tulse Hill, London SE21 8JP. We’re on the corner at the junction of Birkbeck Hill and the South Circular (A205), within easy walking distance of Tulse Hill station (map). We also have a Dulwich office.

Taxfile is Open on Sunday Mornings in January — Perfect for 2022-23 Tax Returns

We’re Open on Sunday Mornings in January — Perfect for 2022-23 Tax Returns

January 18, 2024/in Accountancy, Accountants, Self-assessment, South London, Tax advisors, Tax returns, Taxfile, Tulse Hill/by Mark

With the self-assessment tax return deadline almost upon us, we are opening our Tulse Hill office* on Sunday mornings, 9 am to 1 pm, for the remainder of January. That’s as well as the previously announced Saturday morning opening during the same hours. It’s the perfect opportunity to discuss your tax return with us or bring in figures and records without having to disturb your working week. Weekend time slots are limited, though, so please book a free 20-minute appointment as soon as possible if you’d like to visit.

020 8761 8000 Book Appointment Tax Return Help

Basis Reform and Spreading

January 2, 2024/in Basis Period, Self-assessment, Spreading Tax, Tax, Tax accountant, Tax accountants, Tax advice, Tax advisors, Tax calculation, Tax liability, Tax planning, Tax returns, Taxation, Taxfile, Transitional Profits, Tulse Hill/by Taxfile

As of April 6, 2023, the Self-Assessment (SA) for income tax has undergone a significant transformation, known as Basis Period Reform. This change aims to align the taxation of business profits with the standard April-April tax year, rather than any other accounting periods that may have been required by the taxpayer.

While the transition to the new basis period has introduced certain complexities, it also presents opportunities for businesses to manage their tax liabilities more effectively. One such opportunity lies in the spreading of tax arising from transitional profits.

Transitional profits refer to the profits that arise from the transition between the old and new basis periods. These profits can be spread over Read more

Understanding Basis Period Reform for Self-Assessment Tax in the UK

December 21, 2023/in 2023, 2023-24, 2024, Accountancy, Accountants, Basis Period, Bookkeeping, Making Tax Digital, MTD, Partnership, Self-assessment, Self-employed, Sole traders, Tax, Tax accountants, Tax calculation/by Taxfile

Are you a sole trader or in a partnership?

Do you have different accounting dates from the standard 6th of April to the 5th of Apri?

If you answered YES to both questions, some IMPORTANT changes will apply for the tax year 2023-24.

The concept of the basis period determines the time frame used to calculate taxable profits or losses for self-employed individuals, partnerships, and some trusts. It marks a departure from the traditional “current year” basis, where business profits were taxed based on the accounting period ending within the tax year. Instead, it introduces a “tax year” basis, aligning taxable profits with the UK’s standard tax year, running from 6 April to 5 April. Read more

Boost Your State Pension with Voluntary National Insurance Contributions

December 15, 2023/in 2025, National Insurance, NI, NIC, NIC's, pension contributions, Pensions, State Pension/by Taxfile

As we approach retirement, ensuring a comfortable financial future becomes a top priority. The state pension, a crucial source of retirement income, is dependent on the number of qualifying years of National Insurance (NI) contributions you have made. While gaps in your NI record can diminish your state pension entitlement, there’s a solution: voluntary NI contributions.

To receive the full state pension, you need 35 qualifying years of NI contributions. These years typically accumulate as you work, with contributions automatically deducted from your salary. However, there may be instances where you may not have earned enough to make mandatory NI contributions, leading to gaps in your record. Read more

Tax Return Accountants

December 6, 2023/in Accountancy, Accountants, Dulwich, London, Self-assessment, Self-employed, South London, Tax, Tax advisors, Tax returns, Tulse Hill/by Guy Bridger

HMRC issues tax returns each year to those who meet the criteria; you may be self-employed or a higher earner from employment income. The tax return software available online will calculate your tax liability if you fancy giving it a try yourself. However, most people use accountants and tax advisors who might, in their wisdom, be able to save you money and in some circumstances give you guidance and good advice. Indeed, Taxfile can help in all these areas and we explore this in today’s article. Read more

VAT in the UK: a comprehensive guide including what it is, the different rates, registering, returns, reclaiming it, the different schemes and more.

Navigating the VAT Landscape in the UK: A Comprehensive Guide

December 5, 2023/in Cash basis, Flat rate scheme, HM Revenue and Customs, HMRC, Making Tax Digital, MTD, Value Added Tax, VAT, VAT annual accounting, VAT cash accounting, VAT for retailers, VAT margin schemes, VAT returns/by Taxfile

Value Added Tax (VAT), a consumption tax levied on most goods and services in the UK, plays a significant role in the nation’s economy. Whether you’re a sole trader, limited company business owner or simply a curious consumer, understanding VAT is crucial for navigating the UK’s tax system effectively. Today’s comprehensive guide explains what it is, the various VAT rates, when you need to be registered for the tax, VAT schemes, and more. Read more

Deadline for Voluntary Insurance Contributions Extended to 5th April 2025

June 15, 2023/in 2023, Class 2 NICs, National Insurance, NI, NIC, NIC's, pension contributions, Pensions, State Pension/by Taxfile

The original deadline for buying National Insurance ‘credit’ was 31st July 2023, but you can now ‘buy’ incomplete years to boost your state pension until 5th April 2025. The extension was approved by the Government, giving HMRC more time to deal with the process.

You can view our original blog on what you need to do to plug the gaps in your National Insurance contributions here.

Boost State Pension by Plugging Gaps in National Insurance

April 21, 2023/in Class 2 NICs, National Insurance, NI, NIC, NIC's, pension contributions, pension scheme, Pensions, State Pension/by Mark

^{IMPORTANT: the video mentions the original deadline in April 2023. This has now been extended to 5th April 2025.}

Do you have gaps in your National Insurance record? If so, it could mean that you could get a lower State Pension when you reach state retirement age, particularly if you are aged between approximately 45 and 70 at the moment. Generally speaking, you need 10 years of contributions for a basic state pension and around 30 to 35 years for a full state pension. It does vary by circumstance though and, even with gaps, some people might have enough qualifying years for the full state pension already.

Urgently Check Whether You Have National Insurance Gaps

Our advice is to urgently check whether you do have any gaps in your National Insurance record. If so, in many cases it would be wise to make some one-off payments to plug any gaps for the years 2006 to 2016. However, there is limited time to do so despite the deadline for this opportunity having been extended from early April to the end of July 2023 [UPDATE: This has now been extended again to 5th April 2025]. Thereafter, the chance to fix all 11 years from 2006 to 2016 will be gone forever. Read more

Tax-Free Personal Allowance Thresholds & Tax Bands (2022/23 to 2016/17)

May 28, 2022/in 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023, Accountancy, Accountants, Annual threshold, Band rates, Dulwich, HMRC, London, Personal allowance, Personal Tax Account, South London, Tax, Tax accountants, Tax advice, Tax advisers, Tax calculation, Tax-free allowance, thresholds, Tulse Hill/by Mark

Today we look at the tax-free allowance thresholds for what’s officially known as the tax-free Personal Allowance in the tax and accountancy world.

The Tax-Free Personal Allowance

This is the amount a UK individual can earn as income before they have to pay any Income Tax. In the current tax year (6 April 2022 to 5 April 2023) individuals can earn up to £12,570 before they have to start paying Income Tax, as you’ll see in the first table. In other words, if their taxable income is two thousand pounds more than that, they’ll only have to pay income tax on the extra £2000, not the core £12,570. There are exceptions, and different rules applied before 2016/17, but our aim is to keep things simple in this guide rather than focusing on more rare exceptions. So, below, we show the Personal Allowance thresholds for tax-free income over the last 7 tax years. As you will see, the Tax-Free Personal Allowance has gradually increased over the years.

Tax Bands for Basic Rate, Higher Rate and Additional Rate Taxpayers

The tables also show the various tax bands for earnings above the Personal Allowance threshold. These are the Basic Rate, Higher Rate and Additional Rate income tax bands, with tax rates increasing the more people earn. The information might be useful if you owe income tax from previous years but bear in mind that anyone born prior to 6 April 1948 may be entitled to a larger Personal Allowance.

Please note: this guide focuses only on Income Tax. Taxpayers will also need to allow for other deductions like National Insurance, which we’ll cover in a separate guide, and things like pension contributions, any student loan interest repayments, any tax on dividends, and so on.

Tax-Free Allowance Thresholds 2022/23

For the tax year 6 Apr 2022 to 5 Apr 2023:
The first £12,570 (your Personal Allowance) is tax-free*
Earnings between £12,571 and £50,270 are taxed at 20% (‘Basic Rate’ income tax)
Earnings between £50,271 and £150,000 are taxed at 40% (‘Higher Rate’ income tax)
Earnings over £150,000 are taxed at 45% (‘Additional Rate’ income tax)

* For every £2 earned above £100,000, the Personal Allowance is reduced by £1. It therefore reduces to zero for earnings of £125,140 or more.

Tax-Free Allowance Thresholds 2021/22

For the tax year 6 Apr 2021 to 5 Apr 2022:
The first £12,570 (your Personal Allowance) is tax-free*
‘Basic Rate’ earnings between £12,571 and £50,270 are taxed at 20%
‘Higher Rate’ earnings between £50,271 and £150,000 are taxed at 40%
‘Additional Rate’ earnings over £150,000 are taxed at 45%

* For every £2 earned above £100,000, the Personal Allowance is reduced by £1. It therefore reduces to zero for earnings of £125,140 or more.

Tax-Free Allowance Thresholds 2020/21

For the tax year 6 Apr 2020 to 5 Apr 2021:
The first £12,500 (your Personal Allowance) is tax-free*
‘Basic Rate’ earnings between £12,501 and £50,000 are taxed at 20%
‘Higher Rate’ earnings between £50,001 and £150,000 are taxed at 40%
‘Additional Rate’ earnings over £150,000 are taxed at 45%

* For every £2 earned above £100,000, the Personal Allowance is reduced by £1. It therefore reduces to zero for earnings of £125,000 or more.

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