How to claim a tax rebate when you’re a sole trader

Even if it’s only a few quid, finding out that you’re in line for a tax rebate because you’ve paid too much tax is one of the more pleasant things you can experience when it comes to tax. But, as a sole trader, how can you find out whether you’re due a tax rebate and crucially – how do you get your money back?

What is a tax rebate?

Rebate is just another word for refund, so, a tax rebate is simply a refund or repayment you get when you’ve paid too much tax. Although the Self Assessment system normally ensures that taxpayers pay the right amount of tax, people sometimes make mistakes when filling out their annual Self Assessment tax return, which can mean they pay too much tax (or not enough).

If you earn income from self-employment and employment (ie you also work for someone else), you may get a tax rebate via your employer’s PAYE payroll if, for example, you were on the wrong tax code or you finished a job and started a new one in the same month and earned taxable income from both.

Need to know! You have four years from the end of the tax year in which the overpayment happened to claim a tax refund.   

Am I due a tax rebate?

• When you’re an employee or you receive the state pension, HMRC will send you either a tax calculation letter (a P800) or a Simple Assessment letter to tell you if you’ve paid too much tax. The letters are normally sent between June and the end of November.
• Things are different if you pay tax via Self Assessment, because HMRC does not send a tax calculation letter or a Simple Assessment letter to self-employed sole traders. Instead, normally, your Income Tax bill will be automatically adjusted if you’ve paid too much or not enough tax.

Checking your tax return

To find out if you’ve overpaid tax via Self Assessment, you can either check your tax return yourself or pay an experienced professional to do it for you.

If you’re very clued-up on Self Assessment, checking your tax return is the cheaper option. However, most sole traders aren’t Self Assessment experts. If they were, they’d be less likely to make mistakes in their tax returns.

The quicker, easier and more successful option is to pay an experienced professional to cast their eyes over your tax return(s) to make sure that you haven’t paid too much tax. You’ll need to pay their fee (budget for £100 or so), but you could end up with a tax rebate worth much more and save money on future tax bills.

Need to know! You can change details within a Self Assessment tax return after you’ve filed it and your bill will be updated based on your amended figures.

How to claim a tax rebate or tax refund

If you file your Self Assessment online, you may be able to claim a tax refund via your HMRC online account. Sign into your online HMRC account via Government Gateway (you’ll need your Government Gateway user ID and password). Choose the Request a Repayment option and you’ll be told what to do.

Need to know! You may not get a refund if you have tax due in the next 45 days (eg for a payment on account). Instead, the money will be deducted from the tax you owe.

If you applied for a tax refund in your tax return – don’t claim again. Usually, you’ll get a refund within two weeks if you’re owed one. If you want HMRC to transfer your money into your bank account, you must include your account number and sort code every time you send a tax return. Alternatively, call HMRC to add bank details after filing your tax return.

If you’re owed a tax refund, HMRC will refund the card you paid with or transfer the money into your bank account or your nominee’s bank account). Less commonly, you’ll receive a cheque, which you’ll need to deposit. In some cases, HMRC might contact you for more information or tell you why you’re not due a tax refund.

Need to know! If you do not get a refund after making an online claim, wait four weeks before contacting HMRC about the matter.

What if you don’t get an automatic tax rebate/refund?

If you believe you were due a tax rebate and did not get one refunded automatically, you can call or write to HMRC and tell them why you think you’re due a tax rebate. Be sure to include your Unique Taxpayer Reference (UTR) in your letter, as well as your bank details. You’ll either receive a tax refund in due course or you’ll be told the reasons why you won’t be getting a tax refund.

Need to know! HMRC never sends tax refund notifications by email, so if you receive one, it’s a scam. You can report suspicious emails to HMRC.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.