HM Revenue and Customs (HMRC) is facing criticism over prolonged delays in issuing tax refunds, some stretching beyond four months, triggering frustration among individuals and small businesses who have traditionally relied on quicker turnarounds.
Accountants say refunds that once took only a few weeks now drag on for months, compounding financial pressures for businesses already grappling with tight cash flows.
The delays come as HMRC simultaneously draws fire for its decision to shut down a popular free online filing system used by small businesses, further fueling concerns about accessibility and efficiency.
In recent months, MPs have raised alarms over several issues plaguing the agency, from spiraling call-waiting times, which have averaged over 23 minutes, to the growing labyrinth of the UK’s tax system.
Just last week, Parliament’s Public Accounts Committee (PAC) delivered a scathing review, stating that “taxpayers’ trust in HMRC is falling” and slamming the Making Tax Digital programme for imposing “hundreds of millions in extra costs on the taxpayer.”
Small Firms Struggle With Long Delays
Nikki Ainscough, managing director of Equilibrium Accountants in York, which supports small businesses and charities, revealed that her clients are now facing significant wait times for the return of overpaid taxes.
According to her, it now takes over four months for HMRC to process refunds related to pay as you earn (PAYE) and the Construction Industry Scheme (CIS) — a system where contractors deduct taxes on behalf of subcontractors in the building industry.
“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],” said Ainscough, referencing one client who had significantly overpaid on a PAYE bill.
She provided a screenshot of HMRC’s reply, indicating: “you can expect a reply by 22 August 2025” and confirming that the agency is “currently processing requests received on 10 December 2024.”
Having run her accountancy firm for 12 years, Ainscough noted that such delays are unprecedented. “I’ve never experienced this … Why has it jumped so significantly?” she asked. She suspects the size of the backlog suggests a high volume of pending claims and a significant amount of money owed at a time when businesses desperately need liquidity.
HMRC does offer a tracking tool to estimate response timelines. Ainscough used the tool on behalf of another client awaiting a self-assessment refund of over £1,000. The system stated that the request submitted on 24 April could expect attention by 15 June 2025.
However, it added a caveat: “We may need a further 12 weeks after 15 June 2025 to issue your repayment.” This suggests that while the backlog for self-assessment refunds may be smaller, delays still persist.
It is believed that some of the delays, particularly those affecting PAYE and CIS, stem from industrial action involving HMRC staff. A spokesperson acknowledged the problem, saying: “We’re tackling response times for these refund claims by allocating extra staff to work on them.”
“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.”
HMRC
Most refund requests, according to HMRC, do not require additional checks, which are the main contributors to extended delays of up to 12 weeks.
Adding to the unease among small business owners is HMRC’s recent announcement to permanently retire its free online tax return filing service by March 2026. The system has been widely used by sole traders and small firms to file annual returns and calculate corporation tax.
HMRC defended the move, citing the software’s failure to meet “modern digital standards or recent changes to UK company law.” From April 2026, users will be required to rely on third-party software.
Some of these alternatives carry monthly fees starting at £15, while others offer pricier packages or one-off licenses costing more than £100. Critics say this shift imposes unnecessary costs on the very people the free system was meant to help.
“The online service was simple and fairly straightforward … It seems an incredibly retrograde step to withdraw it,” a small business owner told reporters. Ainscough echoed this sentiment, arguing that HMRC has “clearly decided it did not want to invest in keeping that software up and running.”
With frustration building on multiple fronts, the pressure is on HMRC to restore public confidence and streamline its services in a way that does not disproportionately burden small businesses.
READ ALSO: Independence of Ghana’s Judiciary under Siege from within
