UK HMRC proposes higher penalties for tax return errors

HM Revenue and Customs (HMRC) has opened a consultation on new rules that would increase penalties for taxpayers who do not correct mistakes on self‑assessment returns after being notified. Under the proposals, the maximum penalty for a deliberate error could rise from 30 % of the tax owed to as much as 100 %, while a careless error could be fined up to 30 %. The consultation also seeks to extend the period HMRC can investigate past returns from six to twenty years.

Taxpayers who promptly amend an error after receiving a formal notice and have not been warned in the previous six years would avoid a fine. Critics, including Nimesh Shah of accountancy firm Blick Rothenberg, warn that the changes could disproportionately affect freelancers, self‑employed workers and small landlords who often file returns without professional advice, citing the complexity of the UK tax system and the risk of exposing innocent mistakes to higher penalties.