Can I claim tax back if I closed my business?

At Towerstone Accountants we provide specialist personal tax services, for self employed, and individuals across the UK. This article has been written to explain Can I claim tax back if I closed my business, in clear practical terms, so you understand how personal tax and Self Assessment rules apply in real situations. Our aim is to help you stay compliant, avoid costly mistakes, and make confident tax decisions.

Closing a business is rarely a clean break. From experience, I can say it often comes with unfinished paperwork, unanswered tax questions, and a lingering worry about whether you have paid too much or too little to HMRC. One of the most common questions I am asked after a business has stopped trading is whether it is still possible to claim tax back. In many cases, the answer is yes, but it depends on how the business was set up, when it closed, and whether the final tax position has been calculated correctly.

In this article, I want to explain clearly and calmly how tax repayments work after a business has closed. I will walk through sole traders, partnerships, and limited companies, explain the different types of tax that may be reclaimable, and highlight the mistakes I regularly see that stop people getting money back that they are genuinely entitled to. My aim is to give you clarity and confidence, and to help you understand what practical steps you should take next.

Closing a business does not automatically end your tax affairs

One of the biggest misunderstandings I see is the belief that once a business closes, everything with HMRC simply stops. In reality, closing a business only marks the end of trading activity. Your tax position continues until a final return has been submitted and agreed.

From HMRC’s point of view, a closed business still needs a final review. This usually includes:

• Submitting a final tax return

• Declaring all income earned up to the date of closure

• Claiming allowable expenses incurred before and in some cases after closure

• Paying any tax due, or claiming a refund where tax has been overpaid

Until this process is complete, your tax affairs are not finalised. This is important, because it is often during this final stage that refunds arise.

Why tax refunds are common after a business closes

In my experience, tax refunds after closure are more common than people expect. This is usually because tax payments during trading were based on estimates, forecasts, or earlier profitable years that did not reflect how the business actually ended.

Common reasons refunds arise include:

• Profits falling sharply in the final year

• Losses made before closure that were never fully relieved

• Payments on account that were too high

• Expenses paid personally that were never claimed

• Overpaid National Insurance contributions

Once the final figures are submitted, HMRC recalculates the true tax liability. If you paid more than you should have, the difference can be reclaimed.

Claiming tax back after closing as a sole trader

For sole traders, this is where refunds are most frequently available. Sole traders pay Income Tax and National Insurance through Self Assessment, and this system is heavily reliant on estimates during the year.

Final Self Assessment return

When you stop trading as a sole trader, you still need to complete a Self Assessment tax return for the final tax year. This return should include:

• Income up to the date you stopped trading

• All allowable business expenses

• Capital allowances on any equipment used in the business

• Any trading losses

If your profits were lower than expected, or you made a loss, this can significantly reduce your final tax bill.

Payments on account and refunds

One area I regularly see refunds arise is payments on account. These are advance payments made towards your next tax bill, based on the previous year’s profits.

If you closed your business or your profits dropped, these payments may no longer be due in full. Once your final return is submitted, HMRC will automatically recalculate your position and issue a refund if you have overpaid.

You do not need to be trading to receive this refund. The key is submitting the final return correctly.

Using trading losses to claim tax back

If your business closed after a difficult period, you may have made a trading loss. Many people assume that once a business stops, those losses are wasted. That is not always the case.

Depending on your circumstances, trading losses may be used to:

• Offset against other income in the same tax year

• Carry back to earlier tax years and reclaim tax already paid

• Offset against future income in some cases

From experience, loss carry back claims are often overlooked, yet they can result in meaningful repayments from HMRC. These claims must be made within strict time limits, so it is important not to delay.

Can you reclaim National Insurance after closure

National Insurance is another area where refunds can arise, particularly for sole traders.

If you paid Class 2 or Class 4 National Insurance based on estimated profits, and your final profits were lower, HMRC will adjust this when your final return is processed. Any overpaid contributions are either refunded or offset against other liabilities.

It is also worth checking whether you were liable for Class 2 National Insurance at all in the final year, as low profits can reduce or remove this obligation.

Claiming tax back after closing a limited company

For limited companies, the process is different, but refunds are still possible.

When a company stops trading, it must prepare final accounts and submit a final Corporation Tax return. This return determines whether Corporation Tax has been overpaid.

Refunds can arise where:

• Profits were overestimated

• Expenses were missed in earlier returns

• Capital allowances were not fully claimed

• Trading losses were incurred

If Corporation Tax has been overpaid, HMRC will repay the company, not the director personally. The timing and method of repayment depends on whether the company is still open or being formally dissolved.

VAT refunds after a business closes

VAT is another common area for repayments, even after a business has stopped trading.

If your business was VAT registered, you will normally need to submit a final VAT return. This return can include VAT on:

• Stock still held at closure

• Business assets

• Certain post closure costs, such as accountancy fees

If input VAT exceeds output VAT, HMRC will issue a refund. I regularly see businesses miss out on VAT reclaims simply because they assume VAT ends when trading stops.

Time limits you need to be aware of

One of the most important points I can stress is that tax refunds are time sensitive. HMRC imposes strict deadlines for making claims.

While the exact limits depend on the type of tax and relief, common examples include:

• Four years to amend Self Assessment returns

• Two years for certain loss relief claims

• Specific deadlines for VAT adjustments

If too much time passes, even a valid claim can be refused. This is why acting sooner rather than later matters.

Common mistakes that stop people getting tax back

From my own experience, the biggest obstacles to refunds are not HMRC rules, but simple misunderstandings or delays.

The most common issues I see include:

• Not submitting a final return because the business has closed

• Assuming HMRC will automatically refund without a claim

• Missing allowable expenses in the final year

• Forgetting about payments on account

• Leaving things too late and missing deadlines

Each of these can cost real money.

What you should do next if your business has closed

If you have closed a business and are unsure whether you are due a refund, the most practical next step is to review your final figures properly.

At a minimum, you should:

• Confirm that HMRC has been notified of the closure

• Ensure a final tax return has been submitted

• Review whether profits dropped or losses arose

• Check payments on account and National Insurance

• Consider whether loss relief or VAT reclaims apply

In many cases, a proper review reveals that money is owed back to you.

Key points to takeaway

In my experience, closing a business often feels like the end of a chapter, but from a tax perspective it is rarely the end of the story. I have seen countless cases where people assumed nothing more could be done, only to discover that they had overpaid tax and were entitled to a refund.

The key is understanding that tax does not stop when trading stops. Final returns, final calculations, and final claims matter, and when they are handled properly, they can put money back in your pocket at a time when it is often needed most.

If you are unsure, do not assume the answer is no. More often than not, there is still something to check.

You may also find our guidance on How do accountants help people who have missed previous returns, and How do I check if I am owed a tax refund, helpful when reviewing related personal tax questions. For a broader overview of Self Assessment deadlines, reporting, and obligations, you can visit our self assessment guidance hub.