What is the repayment supplement from HMRC?
Answered 17 March 2026
Here is a comprehensive explanation of the repayment supplement from HMRC:
What the Law Says
The statutory basis for the income tax repayment supplement is found in section 824 of ICTA (repayment supplements: individuals and others) and section 283 of TCGA 1992 (repayment supplements for capital gains tax). Crucially, any interest paid under these provisions does not give rise to a liability to income tax — it is exempt income under ITTOIA 2005, s.749.
Similarly, a VAT repayment supplement paid under section 79 of the Value Added Tax Act 1994 is also non-taxable.
HMRC Guidance / Practice
What is it?
A repayment supplement is an automatic addition made by HMRC when it makes a late repayment of income tax (or related amounts) to a taxpayer. It compensates the taxpayer for the delay in receiving their money back.
It is added when HMRC makes a repayment of:
- Income tax deducted at source
- Surcharge on late paid tax, or
- Penalties
to an individual or other non-corporate person.
Who qualifies?
Repayment supplement is payable (for 1996-97 and subsequent tax years) to:
- Individuals, including non-residents
- Trustees of a settlement
- Personal representatives
It applies to repayments of income tax deducted at source and to payments of tax credit on UK dividends or distributions.
When does it apply?
A repayment supplement is triggered when:
- A repayment of income tax (deducted at source) is made after 31 January following the tax year in which the income was received, or
- A payment of tax credit is made after 31 January following the relevant year of assessment.
How is it calculated?
- It runs from the relevant 31 January to the date HMRC issues the repayment.
- It is calculated as a rate of interest on the amount of the delayed repayment, applied from the "relevant time" to the end of the "tax month" in which the repayment or set-off is made.
Key points
- It does not need to be claimed — it is an automatic entitlement.
- The timing of HMRC's receipt of the claim is irrelevant — it does not affect whether or how much supplement is payable.
- Different rules apply if the income tax repaid was not deducted at source (the supplement may run from a different date).
- The repayment supplement is not taxable income.
Citation sources
A repayment supplement is added to any repayment of income tax deducted at source in a year of assessment where that repayment is made after the 31 January next following that year of assessment. A repayment supplement is also added to any payment of tax credit made after the 31 of January next following the year of assessment to which the tax credit applies. The repayment supplement is calculated from the relevant 31 January to the date on which the repayment, or payment of tax credit is issued
A repayment supplement is added when HMRC makes a repayment of income tax, surcharge on late paid tax, or penalty to an individual or other non-corporate. Under ITTOIA05/S749, this is not treated as income for any purposes. There are corresponding provisions for supplement on repayments of capital gains tax, stamp duty or inheritance tax. In a similar way, a VAT repayment supplement paid under Section 79 Value Added Tax Act 1994 is non-taxable (ITTOIA05/S777). This exemption does not apply to in
When supplement is due it is calculated at a rate of interest on the amount of the delayed repayment. The rate of interest is applied for a period starting at what is called therelevant time' and ending at the end of the tax month’ in which either the repayment or set off is made. The computer will calculate supplement for you except when a previous manual payable order has been issued or there have already been four or more repayment computations for the year or you entered N in REPAYMENT SUPPL
Part 6 Exempt income Chapter 9 Other income Interest only income Repayment interest, and interest paid under repayment supplements 749 No liability to income tax arises in respect of interest paid under— a section 824 of ICTA (repayment supplements: individuals and others), ... b section 283 of TCGA 1992 (repayment supplements) , or c section 102 of FA 2009 (repayment interest) .
Repayment supplement is payable for 1996-97 and following years on repayments of income tax made after 31 January following the tax year in which the claimant received the income with tax deducted at source on payments of tax credit made after 31 January following the tax year in which the claimant received the UK dividend or distribution to individuals, including non-residents to trustees of a settlement or personal representatives. Repayment supplement runs from the relevant 31 January to the