HMRC Proposes Stricter Penalties for Uncorrected Tax Errors

The HM Revenue and Customs has proposed new legislation under the Finance Bill 2026-27 that establishes a legal duty to correct tax errors. Under the draft rules, taxpayers who become aware of an inaccuracy but fail to take reasonable steps to fix it will have the error treated as deliberate for penalty and assessment purposes. This reclassification allows the agency to impose steeper fines—up to 70% for deliberate errors and 100% for those deliberately concealed—compared to the current 30% for careless inaccuracies.

The proposal introduces Customer Correction Notices to prompt taxpayers to fix suspected errors and extends the assessment look-back period up to 20 years, rather than the current six-year limit for careless mistakes. These rules would apply to various taxes, including VAT, corporation, and inheritance tax. A safe harbour exemption is included to avoid penalties for those who fix a careless error following their first notice within six years.

Tax experts and critics have labeled the move a stealth tax, arguing that the complexity of the UK tax system could unfairly penalize honest taxpayers. Some warn that individuals without professional advisers may not realize they have made an error and could face higher penalties. The draft is currently open for technical consultation until September 7, 2026.