HMRC Delays £150,000 Tax Rebate for a Year: Frustrated Business Awaits Funds

Following my mother’s passing, obtaining probate took four years due to financial complications. In that period, my father, acting on his lawyer’s advice, prepaid inheritance tax (IHT) to avoid accruing interest.

Unfortunately, the lawyer had greatly overestimated the required amount.

A year ago, my father requested a refund, and after eight months, HMRC acknowledged he was due £153,500. Yet, two months have passed since without any update. At 86 years old, I fear HMRC might be stalling until he passes away.

To cover the supposed tax debt, he used up his savings and even sold a piece of land, leaving him financially strained.

CJ, Bristol

If we delay our tax payments by 30 days, HMRC imposes a 5% penalty and interest on the due amount. However, when it’s their turn to pay us, they take their time, sometimes up to a year.

Miraculously, three days after escalating your father’s issue to HMRC, he received a call from an actual person, and the owed amount was transferred to his account that same day, including the accrued interest.

It’s worth noting that the interest HMRC charges for late tax payments is the Bank of England base rate (currently 3.75%) plus 4%. The interest paid by them for delays in refunds is 1% below the base rate.

HMRC attributed the delay to a “processing error.”

“I’ve never heard my father so happy,” you mentioned. While this resolution didn’t occur here, HMRC claims such cases are usually settled within 15 working days.

CK, who resides in Spain and is employed by a UK firm, experienced a 13-month delay in receiving a refund from HMRC due to a clerical error on their part.

She attempted to make the most of last year’s extended deadline to backpay national insurance (NI) contributions to enhance her state pension entitlement. However, she discovered that HMRC had incorrectly registered her for the more expensive class 3 NI contributions instead of class 2.

“Class 3 would have cost me an unmanageable £180,000, whereas class 2 was only £3,000,” she explained.

After alerting HMRC to the error, she received a recalculated demand still based on class 3, with a tight payment deadline of one week or risk losing the opportunity.

“Worried about the deadline, I drained my savings to pay as much as I could—over £8,000,” she stated.

Eventually, HMRC acknowledged the mistake, confirming she should have been charged under class 2, and she was entitled to a refund of £5,094.

That confirmation came in October 2025, and there was no further communication. When she followed up in March, she was informed to expect her refund by this November.

“My employer is downsizing significantly this year, and I’ve spent all my savings on this overcharge,” she lamented.

HMRC insists that the refund was processed before the mishandling of her case was pointed out, self-praising its efficiency in beating the forecasted November timeline.

In fact, they approved the payment on the day I contacted them, and the cheque was delivered three weeks later.

HMRC admits that the government has urged it to improve its services; it has hired additional staff to expedite response times.

NS, residing in Poland, faces the reverse issue. He has been attempting to pay up to £10,000 in voluntary NI contributions for a year. His submissions have been met with silence.

“I was informed they are a small team still addressing cases from 14 months ago, and I might need to wait up to a year for a calculation,” he shared.

“It’s absurd that there are individuals eager to contribute millions to the UK economy, yet there aren’t enough resources or personnel to handle these payments,” he added.

HMRC claims that “the vast majority” of contributions are processed within five working days, which wasn’t helpful in his case.

They blamed the backlog on a spike in applications before last year’s deadline, and have now issued him a calculation and a compensation payment.

Finally, a happy ending…

JI, 83, who was mentioned in January, has just received £63,872 in overpaid tax she applied for in April last year. This came five months after I brought up her case with HMRC.

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