HMRC Tax Rebate Missed: Hundreds of Thousands Missing Out

HMRC has been attempting to stem the number of cheques it issues for several years to reduce costs and streamline operations. Hundreds of thousands of taxpayers are currently missing out on refunds worth an average of £800. Last year, HMRC issued 1.7 million cheques to those owed rebates, of which 178,180 were never cashed, resulting in a combined value of £144 million.

In response to these figures, Robert Salter commented, “It is certainly a bit problematic that HMRC continues to use cheques to settle tax refunds in so many cases.” He emphasized the importance of taxpayers consistently opening their HMRC correspondence to avoid delays in the refund process. Salter noted, “Until people do consistently open their HMRC correspondence, there is always going to be a problem and delays with the tax refund process.”

HMRC has been working to reduce the number of cheques it issues in recent years. The tax authority started moving to a new system in 2024, attempting to contact customers in other ways unless they request a cheque. Approximately 20 percent of taxpayers remain on the old cheque system, with a transition to a new system aimed for completion by April 2027.

Most people will receive a P800 letter around June, following the end of the tax year in April, instructing them to request the payment via bank transfer. The vast majority of PAYE repayments are now issued via bank transfer, which is the default option.

However, those who have an uncashed cheque from HMRC can no longer cash it after six months, although a replacement can be issued on request. It may become harder for HMRC to verify the rebate after nine years.

Tax overpayments can arise from various circumstances, including switching employers mid-year and being assigned an incorrect tax code. HMRC will always communicate via letter regarding any tax owed and may follow up with a text reminder if no action is taken.

Shaun Moore remarked, “The data highlights how some parts of the tax system are still struggling to keep pace with a digital economy,” adding that accelerating the shift to digital processes would reduce friction and ensure overpaid tax reaches people more reliably and promptly.