Last year, HMRC issued a staggering 1,746,720 cheques, but alarmingly, 178,180 of these cheques were never cashed, resulting in a total of £144 million in unclaimed refunds. The average missed repayment stands at approximately £800 per taxpayer, highlighting a significant financial impact on individuals who may be unaware of their unclaimed funds.

The transition to a digital system has been ongoing since 2024, with HMRC aiming to complete this shift by April 2027. Currently, around 20% of taxpayers have not yet been migrated to this new system, which raises questions about the effectiveness of communication and outreach efforts by HMRC. Historically, if taxpayers did not respond to HMRC correspondence within 21 days, a cheque would be issued to the address on file, a practice that now seems outdated.

Critics have voiced their concerns regarding HMRC’s continued reliance on cheques. Robert Salter, a financial analyst, stated, “It is certainly a bit problematic that HMRC continues to use cheques to settle tax refunds in so many cases.” This sentiment is echoed by Shaun Moore, who noted, “The data highlights how some parts of the tax system are still struggling to keep pace with a digital economy.”

Despite the ongoing transition, HMRC has emphasized that the majority of pay as you earn (PAYE) repayments are now issued via bank transfer, which is the default option and considered the quickest and most secure way for customers to receive their money. An HMRC spokesperson confirmed this, indicating a clear preference for digital transactions moving forward.

For taxpayers who prefer traditional methods, HMRC still allows customers to request their repayment via cheque. However, the agency has been actively reducing cheque usage as part of its modernization efforts. The six-month validity period for cheques further complicates the situation, as uncashed cheques may expire before taxpayers are aware of their existence.

As HMRC continues its transition towards a more efficient digital payment system, the current state of cheque issuance serves as a reminder of the challenges faced by government agencies in adapting to technological advancements. The significant number of unclaimed cheques underscores the need for improved communication and education for taxpayers about their options and entitlements.

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