HMRC backlog causes unprecedented delays in tax refunds for UK businesses and individuals
HM Revenue and Customs has blamed the delays on a 'backlog' that has built up at the tax office, with some individuals and small businesses reporting waits of more than four months for refunds
HM Revenue and Customs is receiving criticism for making individuals and small businesses wait over four months for tax refunds – a process that accountants recall used to take mere weeks.
The backlog is causing a stir among professionals, especially amidst escalating dissatisfaction with HMRC's service levels, which have drawn flak from MPs and raised alarms for Britain's beleaguered small enterprises.
Particularly affected are employers' PAYE and the Construction Industry Scheme (CIS), both of which involve businesses seeking to recoup excess tax and National Insurance payments.
Nikki Ainscough, managing director at York's Equilibrium Accountants, highlighted the plight of a client who overpaid on PAYE and has been told to hang tight until August for reimbursement, despite lodging the request in March.
"We are being told they are going to need to wait until August for the funds to be released, for a request we put in [in March]," Ainscough revealed.
An HMRC screenshot confirmed the grim forecast: "You can expect a reply by 22 August 2025", indicating the tax office is still sifting through requests from the previous December. Ainscough, with 12 years at the helm of her practice, expressed that such hold-ups were unheard of.
"I've never experienced this ... Why has it jumped so significantly?" she questioned. She suggested that the sizeable backlog hints at a large volume of claims and a potentially hefty sum owed to small businesses and individuals at a time when cash flow is paramount.
Even for self-assessment tax refunds – where the wait isn't as bad – HMRC has warned that payments may take up to 12 weeks longer than the expected date. One customer, who's supposed to get back over £1,000, might be twiddling their thumbs until September.
The crunch in HMRC's service levels appears to have been exacerbated by some staff participating in strikes, mainly those dealing with PAYE and CIS repayments, adding to the delay woes. An HMRC rep has owned up to the setbacks but was quick to reassure: "We're tackling response times for these refund claims by allocating extra staff to work on them."
They also boasted about a jump in customer satisfaction, saying: "We've made significant improvements to our customer service overall. Customer satisfaction stands at about 80%, and the funding settlement we have received means we'll be able to meet our service standards in 2025–26."
Meanwhile, small businesses are left reeling from HMRC's decision to pull the plug on its gratis online tax filing service. This blow means come April 2026, loads of little firms will have to fork out for commercial software to submit their corporation tax returns.
Standing by the decision, an HMRC spokesperson said: "This transitional service was introduced in 2015 to help small, unrepresented companies switch to online filing when there was a limited software market.
"It's right that we close this outdated support now that there's a range of commercial software which provides a much better service, and we've published guidance to help companies prepare for the change."
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