Self Assessment Taxpayers May Have Overpaid Billions, Study Suggests

Millions of UK taxpayers may have handed over far more to HMRC than they legally owed and never realised it. Newly released figures based on HMRC data suggest that Self Assessment taxpayers have overpaid billions of pounds in Income Tax, with refunds often left unclaimed simply because returns were never reviewed.

The issue disproportionately affects sole traders, landlords and individuals with multiple income streams, where complex rules, conservative estimates and missed reliefs can quietly inflate tax bills. With overpayments rarely flagged automatically, many taxpayers continue to lose money each year unless they actively check their calculations or seek professional advice, turning Self Assessment into a silent drain on household finances.

How Are Self Assessment Taxpayers Overpaying Taxes By Billions?

One of the main reasons for overpayment appears to be the payments on account system. This requires many Self Assessment taxpayers to make advance payments based on the previous year’s tax bill.

If income falls in the following year, those advance payments can end up exceeding the tax actually due. This is particularly common for people with fluctuating earnings, who may not realise they have paid more tax than required.

Figures shared by HMRC suggest around 2.6 million people may have overpaid Income Tax through Self Assessment in the last year alone, with the total value of overpayments running into several billions of pounds.

Can’t We Get Refunds for Overpaid Tax?

Unlike PAYE adjustments, HMRC does not automatically correct overpayments made through Self Assessment. Taxpayers must identify the issue themselves and actively request a refund.

Many people assume their tax bill has been calculated correctly and do not realise they may be owed money. Without checking their return carefully, overpaid tax can remain with HMRC indefinitely.

This means responsibility sits with the taxpayer to review their figures and follow up if something does not look right.

What Causes Tax Overpayments?

Overpayments are not only caused by how the system works. Basic mistakes when completing a Self Assessment Tax Return can also lead to higher tax bills than necessary.

Common errors include entering incorrect income figures or failing to claim allowable business expenses such as travel or supplies. When legitimate expenses are missed, individuals may end up paying tax on income that does not reflect their true profit.

These mistakes are easy to make, especially when returns are completed under time pressure or without professional support.

How Long Will It Take to Claim a Refund?

Even when an overpayment is identified, getting money back is not always quick. Ongoing backlogs at HMRC mean repayments can take a long time to process.

Some taxpayers have reported waiting many months, and in some cases more than a year, to receive refunds they are owed. These delays can create additional pressure, especially for sole traders and small business owners who rely on steady cashflow.

This makes early checks and prompt action especially important.

Conclusion

These findings highlight the importance of paying great attention to your Self Assessment Tax Return, rather than treating it as a burden to get done as quickly as possible. Understanding how payments on account work and reviewing income and expenses carefully can help reduce the risk of overpayment.

For those who are unsure about their figures, seeking guidance before submitting a return may help avoid mistakes and missed refunds. Taking time to review returns and follow up with HMRC where needed can help ensure taxpayers are paying the correct amount.