ACCA Applied Skills · Taxation (UK) · The systems for self-assessment and the making of returns
Dev overpaid income tax of £6,000 for 2023/24. HMRC repaid it on 1 July 2025, and the tax had been paid on 31 January 2025 as a balancing payment. Assuming the overpaid-tax interest rate in the tax tables and ignoring the effect of rounding of days, what is the approximate interest Dev receives, using a period of 5 months?
Dev receives about £87.50. Repayment interest is paid at the overpaid tax rate of 3.5%, so £6,000 multiplied by 3.5% and by 5/12 gives £87.50. Using the 8.5% underpaid tax rate would be wrong.
- A£87.50Correct
- B£125.00
- C£210.00
- D£77.00
Explanation
Interest on overpaid tax is at 3.5% per year. For 5 months: £6,000 x 3.5% x 5/12 = £87.50. The 8.5% underpaid rate would give £212.50, and £125 uses 5% incorrectly.
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