Why Owing the IR isn't as Bad as it Sounds

While everyone looks forward to receiving a tax refund at the end of a year (which admittedly is very pleasant), and dreads being told they actually owe money to the Inland Revenue, financially speaking the latter is actually preferable.

By being due a refund, you are actually foregoing the interest you would have earned on the amount you should have received originally. For example, if Revenue owed you £1,000, the interest rate was 5% and you only received your refund after a year, you would have lost out on £50 worth of interest that year. Revenue would have earned that interest instead, but they won’t be paying it over to you.

On the other side of the coin, if you have not paid enough tax and end up owing Revenue money, effectively they will now have given you an interest free loan instead. Using the same figures as above, you would have earned £50 interest with their money, which you in turn do not have to pay back.

How Taxes Work

Tax Refunds for Travellers

Student Tax

Tax Refunds for the Unemployed

Income Tax Rebate for Mothers

Why Owing the IR Isn’t as Bad as it Sounds

The 2008 UK Budget and its Implications

Income Tax Rates