Taxpayers are often surprised to find out that they owe money to HM Revenue & Customs (HMRC). And it’s not always because they didn’t declare all their income. You might also be liable for additional taxes such as National Insurance contributions (NIC), Income Tax or Capital Gains Tax.
If you think you owe tax, you can make a voluntary repayment or request a repayment plan. Or you can apply for a repayment agreement.
But what happens if you don’t pay back what you owe? Here’s how to deal with unpaid tax.
1. Paying back tax
You can usually pay back your tax debt without having to go to court. However, you might need to wait for up to three months before you start getting refunds.
2. Claiming back tax
There are different ways to reclaim some of the money you owe. For example, you can ask HM Revenue & Customs (HMC) to cancel your tax bill or reduce the amount you owe.
How do tax refunds through Self Assessment typically function?
When you complete your tax return online, HM Revenue & Customs (HMRC) will process it and send it to you electronically. They will also send you an email confirmation of receipt. If you haven’t already done so, you can log into My Account to see how much you owe.
Once HMRC have received your return, they will issue a statement showing what money they think you owe. This is called a repayment notice. In most cases, you will receive a letter or email within 10 working days.
If you decide to make a repayment, you must provide evidence to support why you believe you owe less than the amount shown on the repayment notice. For example, you could show that you paid off a loan earlier in the year, or that you had a lower income in previous years.
You can request a refund if there isn’t enough money owing on your return. If you don’t want to pay back what’s owed, you should contact HM Revenue & Customs, who will then process the request.
Most repayments are issued automatically when HMRC process your return. If you want to change the way you pay, you should contact HM Treasury Customer Services.
There are a number of circumstances under which you might not receive a full refund. These include:
• Your return doesn’t meet the requirements set out by HM Revenue & Customs.
Why was my loan repayment halted for a security check?
HM Revenue & Customs (HMRC) recently announced it had carried out over 2 million security checks on taxpayers’ accounts. This includes checking whether tax returns are valid and making sure payments are correct. If you receive a letter stating that your payment has been blocked due to a security check, contact HMRC immediately. You don’t want to miss out on paying your taxes.
The majority of people do not know about the changes to the way HMRC conducts security checks. However, there are some important things to note.
Security Checks Are Increasingly Common
Since April 2017, HMRC has required all self-assessment taxpayers to complete a digital signature on every return. In addition, HMRC now requires those doing quarterly income tax to submit their tax return online. These changes mean that HMRC must conduct additional checks on all taxpayers.
If you’ve received a letter saying that your payment has been stopped because of a security check, you’ll likely be asked to provide information such as your date of birth and National Insurance number.
Contact HMRC To Find Out What Is Going On
You can call HMRC directly to find out what is happening. Call 0300 123 5000 or email [email protected].
What happens if I make excess payments on account?
If you have made an error with your tax return, you can ask HM Revenue & Customs (HMRC) for a refund. You must do this within three months of submitting your return. For example, if you submit your tax return on April 15th, you must make a claim for a refund no later than June 14th.
This is known as self assessment. Self assessment is usually done online via HMRC’s e-filing system. However, there are some exceptions. These include:
• When you file paper returns.
• If you don’t use the internet.
• If you live abroad.
You can find out what you need to know about filing your tax return here.
If you pay too much money in advance on account, you can ask HM Treasury for a refund. This is called prepayment. Prepaid refunds are normally processed within 10 working days.
How do I request a tax refund if I made an error on my tax return?
If you filed your taxes electronically, you likely already know how to request a refund. If you did it manually, here are some tips on how to file a tax return and request a refund.
Step 1: Log into your online service account. Step 2: Select ‘Taxes’ from the left menu bar.
Step 3: Click ‘Refund Request.’
Step 4: Enter the amount of money you want to refund.
Step 5: Choose whether you want to receive a check or use Direct Deposit.
Step 6: Click Submit Refund Request.
Step 7: Wait for your refund to arrive.
You’ll see the status of your refund in the next few days. Once your refund appears, it takes about three weeks for the IRS to issue a check or send you a payment via Direct Deposit.
How do I get a refund if I am unable to modify my tax return?
Overpayment relief allows people who paid too much tax to reclaim some of what they owe. If you find yourself owing money because you didn’t complete your tax return correctly, there’s no need to worry – HM Revenue & Customs (HMRC) offers overpayment relief. This lets you reclaim up to £1,500 in underpaid income tax, national insurance contributions (NICs), capital gains tax (CGT), inheritance tax (IHT) and corporation tax (CT).
There are two ways to claim this relief: either you can write to HMRC asking for a repayment, or you can ask them to repay the money themselves. Either way, you must give notice within ten days of receiving the refund form.
You must provide proof of postage when sending off the form. The best thing to do is to use the same method used for submitting the original tax return; the post office usually provides a receipt proving that the letter was sent.
If you don’t want to wait for HMRC to make a decision about your request, you can go ahead and file an amended tax return. However, you won’t be able to receive any refunds until HMRC has processed your amended return.
To help you out, we’ve put together a guide to claiming overpayment relief.
What are the time constraints for tax refunds?
If you paid any money to HM Revenue & Customs (HMRC), it’s important to know what time limit applies to your claim. You must submit your tax return within three months of making the payment, or six months if you paid an excess payment on account.
The deadline for filing your tax return depends on whether you owe money to HMRC. Here’s how long you have to file your tax return:
• If you owe no money, you have up to three months to file your tax return.
• If you owe £100 or less, you have up to six months to file your tax.
• If you owed more than £100, you have up to 12 months to file your tax report.
You don’t have to wait until the end of the financial year to file your tax return – you can do it anytime during the year. However, you won’t get a refund unless you file your tax return within the appropriate timeframe.
Frequently Asked Questions
What do I need to include on my SA303?
HM Revenue & Customs (HMRC) recently updated its guidance on how to complete Form SA303 – Application for Registration of Payment Arrangements (SA303). In addition to providing information about the way in which you must calculate the amount of the payment on account, the form now includes instructions on how to explain why the figure should be changed.
The form asks you to state whether there are any changes to the amount of tax payable. If there are, you must give reasons for each change.
You will need to provide an estimation of the payment on account. For example, if you had £1,000 of taxable profit, you could use the following calculation to determine the correct payment on account:
£1000 x 0.062 £62.00
If you want to reduce the payment on account by the amount of tax allowances and/or reliefs, you must add up the total value of the allowances and reliefs, including those that apply to you personally. Then divide the sum of these figures by 10.
Finally, you will need to explain why the payment on account should not be increased. For example, you could say that the reduction is due to a decrease in business profits or that you have received additional benefits.
When should I submit an SA303?
The Government announced earlier this week that it will issue a revised version of the Self Assessment form (SA303) next month. From April 2020, people will need to complete the form every year to claim refunds and credits.
To reduce your payments on account, you will need to submit the form by 31st January after the end of the financial year. If you are claiming a refund, you must submit the form by 31 December after the end of the relevant tax year.