HMRC has been attempting to stem the number of cheques it issues for several years to reduce costs and streamline operations. However, hundreds of thousands of taxpayers are currently missing out on refunds worth an average of £800 each. Last year alone, HMRC issued 1.7 million cheques, but 178,180 of these were never cashed, resulting in a staggering £144 million in unclaimed rebates.
In a bid to modernize its processes, HMRC has been working to reduce the number of cheques issued, moving towards a new system that began in 2024. This system aims to contact customers through alternative methods unless they specifically request a cheque. Most taxpayers will receive a P800 letter around June, following the end of the tax year in April, instructing them on how to request their payment via bank transfer.
Despite these efforts, approximately 20 percent of taxpayers remain on the old cheque system, with a full transition to the new system expected by April 2027. Robert Salter, a tax expert, commented, “It is certainly a bit problematic that HMRC continues to use cheques to settle tax refunds in so many cases.” He further noted, “Until people do consistently open their HMRC correspondence, there is always going to be a problem and delays with the tax refund process.”
For those with uncashed cheques, it is important to act quickly, as they can no longer be cashed after six months. However, a replacement cheque can be issued upon request. Observers warn that it may become increasingly difficult for HMRC to verify rebates after nine years.
Tax overpayments can arise from various circumstances, including switching employers mid-year or 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, another tax expert, stated, “The data highlights how some parts of the tax system are still struggling to keep pace with a digital economy.” He emphasized that accelerating the shift to digital processes would reduce friction and ensure overpaid tax reaches people more reliably and promptly.
