HMRC could hit millions of Brits with fines for “innocent mistakes” under new plans being considered by officials.
Unaware Brits could be hit with as much as a 30 per cent penalty for a simple error on their tax return.
Proposals being drawn up by those working at the UK tax collector would see the Government department allowed to penalise self-employed workers and landlords who have made a deliberate mistake on their tax return.
A “deliberate” error means intentionally submitting wrong information to HMRC and would see those responsible hit with a 100 per cent fine.
However, under the new plans a “careless error” would also be penalised.
Brits would have an obligation to correct tax mistakes once they become aware of them.
Officials could issue a formal letter called a Customer Correction Notice, which requires the individual to check they have paid the right tax.
If a first Customer Correction Notice is issued and an error corrected within six years, it will be treated as a “careless mistake” with no fine imposed.
But should they fail to fix the issue, HMRC will treat the error as “deliberate”.
Nimesh Shah, from accountancy firm Blick Rothenberg, warned those who misunderstand income tax requirements could be unfairly caught out by the changes.
“A taxpayer may make an innocent mistake because they don’t understand the rules,” he said.
“Most people are not represented by a tax adviser – and so taxpayers may genuinely not know when they have made an error and could find themselves exposed to higher penalties.”
HMRC says the changes would help to improve compliance and free up staff resources to focus on more complex cases of tax dodging.
The proposals are being considered as part of a consultation which will end next month.
A HMRC spokesperson said: “We know most of our customers act in good faith and want to get their tax right.
“These proposals are designed to help minimise penalties for those who swiftly correct mistakes when we flag them and make the process of doing so quicker and easier.”
Earlier this year it was revealed HMRC is also making millions in extra revenue due to a surge in inheritance tax fines over the past five years.
Penalties for late notices have risen by more than a third, with the taxman making £3.1million in the 2024-25 financial year due to late penalties.
