HMRC has been forced to abandon more than 48,000 tax return fines for the last financial year.
The Government department dropped the claims after a record number of taxpayers successfully appealed the penalties they had been issued.
In total, 48,189 fines for the 2025-26 tax year were dropped, a 4 per cent increase on the previous period.
Almost two-thirds of those who appealed their fine had the matter dropped.
The reduction in fines comes despite approximately one million people missing the January 31 deadline to submit a personal tax return.
The number of initial fines issued, before appeals, also saw a dip for the 2025-26 tax year. In 2024-25, almost 9.1 million penalties were issued, but the number dropped to 8.1 million this time around.
HMRC said its new online appeals system meant more people were likely to ask for a review of their fine and increased the chances of wrongly issued penalties being swiftly cancelled.
Andrew Park, of accountancy firm Price Bailey, said: “Because these are high-volume, automatically generated fines, they lack human oversight at the point of issuance.
“The high success rate of these appeals suggests that many more taxpayers could successfully challenge unfair penalties if they felt confident navigating the process.”
Penalties can be overturned if there is a “reasonable excuse” for failing to submit a tax return online, such as a bereavement.
Penalty notices may also be issued in error if, for example, someone moves abroad and is no longer required to file a tax return to HMRC.
A HMRC spokesman said: “Our aim is to help people to get their tax right and avoid fines altogether, and about 11.5 million customers filed their 2024-25 tax return on time.
“If you no longer need to file a tax return, including because your earnings are lower, check using our online tool and then tell us to avoid a penalty.
“Those who believe they’ve incorrectly received a penalty for filing late can appeal.
“We can cancel penalties when a reasonable excuse is provided.”
Anyone who misses the tax deadline is hit with an initial £100 fixed penalty fine. After a three-month period, the amount can rise by as much as £10 per day to a maximum of £900.
The penalties get even more severe if a tax return is not filed after three months, with further costs added after the six and 12-month marks.
Away from the record number of fines being overturned, earlier this year, HMRC was forced to admit having overtaxed as many as 8.7 million pensioners for at least a decade.
It means millions of Brits could be entitled to a refund from the taxman.
READ MORE: HMRC owes tax refunds worth hundreds of pounds to 700,000 Brits
