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Saturday
Feb062010

Did you pay too much tax this year?

Are you one of the many thousands of self employed who, despite the annual promise, the resolution, that never again will you leave it until the last minute to get those tax returns submitted, spent the tail end of January in a frenzy of last minute tax return activity? You wouldn't be alone.

Plenty of business people find themselves rushing to meet the HMRC submission date in order not to suffer fines. 'Never again,' you say. 'Next year will be different. Next year I promise myself that I will get all my paperwork together in good time. No more rushing. No more pain.'

We'll see.

To add insult to the injury already felt by those who've rushed to get their returns and payments made on time comes the news that many of us are actually paying too much tax.

In fact some experts estimate that self-employed people in the UK are paying up to £1 billion too much.

A spokesman for the Federation of Small Businesses recently told The Times that because HMRC's assessment of tax due is based on earnings for previous years and the majority of self-employed people have experienced a fall in earnings throughout 2009 (the FSB themselves calculate that 80 per cent of the 3 million self-employed people in the UK suffered an average drop in earnings of about 10 per cent), they will end up paying too much tax.

Though the Inland Revenue factors income fluctuations into its calculations there is a time lag. 'We find that it is very quick to adjust figures up in the good times but very slow to adjust downwards in the bad times,' said Stephen Alambritis of the FSB.

This wouldn't be the first time that the Inland Revenue found itself with more cash than it was entitled to. In 2008 they took an estimated £250m too much off people's savings as banks and building societies deducted 20% tax automatically from the interest earned on savers accounts, even if the savers were exempt from paying tax.

'We know that there are a lot of pensioners who need every penny,' Claire Merrils of HM Revenue & Customs told the BBC. 'So if they want their money back please claim it because it's yours.'

Will they be so quick in coming forward this time do you think?

 



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