“In this world, nothing is certain,” said Benjamin Franklin gloomily, “except death and taxes.” That said, many of us get nice surprises in the form of income tax rebates.

While most people put their income tax rebates in the bank as soon as possible, a surprising number don’t. According to a freedom of information request submitted by the i newspaper, more than 600,000 people had not cashed their income tax rebate cheques. At the beginning of November 2023, £217 million remained unclaimed. That works out at an average of £350 per person.

Why are income tax rebates going unclaimed?

One of the main reasons income tax rebates are going unclaimed is likely to be HMRC’s outdated system.

If you pay too much income tax, HMRC will send you a P800 letter. This gives you instructions on how to arrange your rebate via bank transfer.

However, you need to act reasonably quickly. If HMRC hasn’t heard from you within 21 days, it will send you a cheque.

This is where problems begin to creep into the system. If you haven’t given HMRC your most recent address, your cheque will be sent to the wrong place. In addition, many younger taxpayers aren’t familiar with how to deal with cheques. Undoubtedly, some people who do receive cheques subsequently lose them.

How the system needs to change

In an ideal world, HMRC would automatically refund your payment via your tax code. It would be a simpler solution and it would reduce postage costs. It would also ensure everyone got the income tax rebates they are entitled to.

However, HMRC itself says: ““The quickest and most secure way for a customer to receive their repayment is to request a direct payment to their bank account. If a customer receives a cheque, because they chose not to have the money paid to their bank account, it’s their responsibility to cash it.”

HMRC given extra cash to chase unpaid taxes

While HMRC may lack motivation to make sure all income tax rebates are claimed, it is certainly keen on pursuing unpaid taxes. Indeed, in the Autumn Statement 2023, chancellor Jeremy Hunt gave the taxman an extra £163 million in funding. The money is intended to help close the tax gap. This is the difference between tax owed to HMRC and what is collected.

The extra money is forecast to help HMRC collect an additional £5 billion in tax over the next five years. A Treasury document said that ““HMRC will also expand its debt-management capacity to support both individual and business taxpayers out of debt faster and collect debts that are due.”

Additionally, the Autumn Statement also said new legislation will crack down on those who promote tax avoidance schemes. This will include powers such as HMRC bringing disqualification actions against company directors.

The Autumn Finance Bill will also require employers, company directors and the self-employed to provide new or improved data to HMRC from the 2025/26 tax year. Employers will have to provide data on employee hours paid via PAYE. Self-assessment taxpayers will need to provide dividend income and the percentage share from shareholders in owner-managed businesses separately to other dividend income, and, for trading businesses, the start and end dates of self-employment.

If you would like any help with your Self-Assessment tax returns or have any queries about income tax rebates, please talk to your THP account manager.

Need further advice on any of the topics being discussed? Get in touch and see how we can help.

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    Avatar for Karen Jones
    About Karen Jones

    Having worked for one of the world’s largest accountancy firms, Karen Jones uses her tax knowledge and skills to help clients obtain substantial reductions to their tax liabilities.

    With an expanding portfolio of tax clients, Karen enjoys the variety her work brings her and particularly likes working with new businesses and people. With a growing number of tax clients, she frequently faces a variety of challenges and relishes the experience she gains as she solves them.

    Karen likes the THP ethos: “I like the way the team has a professional, but friendly and down-to-earth approach – it creates a productive atmosphere that benefits everyone.”

    Karen’s specialist skills:

    • Personal Taxation
    • Tax Efficient Planning
    • Trust Administration
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