What Happens If I Pay Too Much Tax?
One of the most basic but crucial parts of running your own business is filling out your corporation tax returns and paying your tax on time. Neglecting either can result in some pretty big fines. But what happens if you’ve paid too much corporation tax? Below, we’ll take a look at what happens and how to claim it back.
What is Corporation Tax?
If you are registered as a private limited company with HMRC, you are required to pay corporation tax, which is payable against your profits. Companies don’t get any tax-free allowances. However, expenses and deductions can be submitted for outgoings such as employee salaries, travelling and equipment. These expenses help to reduce your total corporation tax bill and can easily be managed through your corporation tax return. From 1st April 2023, the corporation tax rate increased to 25%.
I’ve paid too much!
If your company has paid too much corporation tax, HMRC will repay what you’ve overpaid and may also pay you interest on it which is currently 0.5%. You’ll be eligible for interest if you’ve paid tax early, known as credit interest, or paid more than your company owes, known as repayment interest.
HMRC will pay interest from the date you pay your corporation tax to the payment deadline. The earliest date they’ll pay interest is 6 months and 13 days after the start of your accounting period. If you pay more than you owe, HMRC will usually pay interest on your refund from either when the tax was due or when you paid the tax; if you paid after the due date. If you pay in instalments, HMRC automatically pays you the interest after they know your final Corporation Tax bill for the accounting period, which is normally when you file your Company Tax Return. If you pay in quarterly instalments, your interest is calculated from the later date of either the first instalment date or the date your balance goes above what you owe.
How to claim a corporate tax refund?
To claim a corporation tax refund, you’ll need to file a Company Tax Return to notify HMRC that you’ve overpaid tax. This can be done online and includes a section for your bank details, allowing HMRC to automatically process your claim and transfer any refund due. If you do not include your bank details, HMRC will use the money you’re owed to either pay other taxes your business owes, such as VAT or PAYE, or your next corporation tax bill.
At Easy Digital .Tax we make it easy and seamless for business owners like you to file end-of-year tax returns, claim tax refunds and much more. Get started today
