Small business tax - How to easily claim a tax refund

Getting your head around tax refunds and returns can be a real struggle if you’re a small business owner, especially if you have other worries on your plate. You want to ensure you know how to claim your money back as quickly as possible if you’ve paid too much tax. Read this Bionic guide to find out how to start the process.

What is a tax refund?

A tax refund refers to any money owed to you by His Majesty Revenue and Customs (HMRC). There are a number of reasons you may have paid too much tax. For example, if you were put in the emergency tax bracket while HMRC works out your correct tax figure. 

As a small business owner, you may be able to get a tax refund if you’ve paid too much tax. Visit https://www.gov.uk/claim-tax-refund to see if you are eligible for money back.

You could have paid too much or too little tax as a result of:

• Pay from your current job
• Pay from your previous job
• Pension payments
• Redundancy payments
• Incorrect details on a Self-Assessment tax return
• Interest from savings or PPI
• Overseas income
• UK income (if you live abroad)
• Expenses (eg: fuel costs or work clothing)

What’s the difference between a tax return and a tax refund?

It might seem tricky to get your head around some of the jargon used when talking about tax. But basically, a tax refund is the money HMRC gives back to you when you've paid too much tax. A tax return is a tool you can use to claim that refund. A tax return is a document that details your earnings and any costs you incur as a business. Find out more about completing your small business tax returns with our guide. 

You might be able to tell if you have overpaid tax if you have made a mistake on your tax return or forgotten to deduct certain figures. However, in most cases, HMRC will automatically check your tax and refund you if you have paid too much.

How to claim a tax refund

So, how do you actually claim your refund if it turns out you have paid too much tax? Again, If HMRC thinks you have overpaid tax for any reason, it will automatically send you a refund. You won’t need to make a claim and they will usually notify you via letter. 

On the other hand, if HMRC thinks you have not paid enough tax, it will again write to you and explain that the underpaid tax needs collecting.

Remember to be cautious about email or text scams from organisations claiming to be HMRC offering you a tax refund. The real HMRC will not need any bank details from you. If in doubt, give HMRC a call on 0300 200 3300 to double-check.

For the self-employed

If you are self-employed, you can still claim a tax refund. If you've paid too much tax for whatever reason, e.g, if you made an error on your tax return, you could be entitled to money back.

If you complete a Self-Assessment tax return and overpay tax, then HMRC will deal with your repayment after they have processed your tax return.

Corporation-tax refund

Again, if you think your business has paid too much Corporation Tax, HMRC will refund you the money. In certain situations, they might also pay interest at 0.5%. 

If your business has overpaid corporation tax, you can use your ‘Company Tax Return’ document to tell HMRC. You can also tell them how you would like to be repaid as there are a few options to choose from. 

You can either have the money repaid directly into your company’s bank account or a separate account. You must include the correct bank account details in your tax return so it's clear where you’d like to receive the repayment.

You can also opt to use the repayment to offset against your next Corporation Tax bill or square any late penalties you might have incurred previously. You can also use the refund to pay another tax bill your company has, for example, a VAT bill. Read more about corporation tax with our handy guide. 

What about VAT-registered businesses?

VAT-registered businesses can claim back VAT from HMRC. Every UK business with a turnover of £85,000 or more must sign up as a VAT-registered business. However, you can also register if your turnover is below this figure if you choose to.

Once you are registered, you’ll need to charge VAT on any goods and services you sell. But you can also claim the VAT back on business expenses. But you can't claim VAT on business energy unless you are eligible for the reduced rate of 5%. To find out more, check out our guide to VAT on business energy.

When would HMRC pay me interest?

In some situations, HMRC might pay you interest at 0.5%. For example, if you paid your tax bill early or if you have paid more than your company owes in Corporation Tax, you might have interest paid to you as well. 

Remember to include this interest figure in your company tax return though. This is because it counts as taxable income and you could get in trouble if you don’t declare it.

How long will it take to receive my tax refund?

It really depends on HMRC’s processing times at the time you are waiting for your refund. In most cases, a tax rebate requested by you will be issued within 8-12 weeks. But this is just a rough time frame and can change depending on certain circumstances such as the time of year.

However, if your P800 (your personal tax calculation) says you are owed money then you’ll usually be sent the money within 5 working days. If you do not claim the refund within 21 days, then HMRC will send you a cheque within 6 weeks of the date on your P800.

How can Bionic help my business?

Working out how to claim a tax refund can seem like a lot of hassle, but it isn’t as difficult as it appears. HMRC will automatically refund your money or you simply notify them and they can amend your tax details. But you may worry you don’t have enough time to juggle completing tax returns with your other business admin.

Luckily, that’s where Bionic can help you save time, hassle, and unnecessary admin when sorting business essentials. We compare business gas and business electricity, as well as business phone and broadband to help make sure you're on the best deals. We can also help with business insurance and business finance. Get in touch to find out more.