HMRC has confirmed that more than 48,000 tax return penalties have been scrapped after taxpayers successfully appealed a record 48,189 fines in 2025-26. The tax authority, which operates under the Labour Party government, revealed in its latest annual accounts that its automated system made it “more likely” for customers to appeal and allowed fines to be “quickly and efficiently” removed.
Of the fines appealed, 65 per cent were cancelled. This high success rate has prompted calls for a fairer approach to penalty issuance, with experts suggesting that many more taxpayers could challenge unfair penalties if they were confident navigating the process.
Lack of Human Oversight
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.” He added: “The high success rate of these appeals suggests that many more taxpayers could successfully challenge unfair penalties if they felt confident navigating the process.”
Sean Drury, of tax firm Blick Rothenberg, highlighted systemic issues: “There’s an awful lot of these automatic penalty notices that go out which are actually incorrect. For example, someone leaves the UK, no longer needs to file a tax return, but HMRC’s system still thinks they should be filing in the future and therefore issues penalty notices.”
Calls for Points-Based System
Mr Park advocated for a change in the penalty structure: “Transitioning to a points-based system is a much fairer approach for everyday taxpayers. Crucially, it relieves HMRC of a massive administrative burden, allowing their teams to focus resources on genuine non-compliance rather than processing appeals for accidental, one-off mistakes.”
Taxpayers who wish to challenge penalties must usually provide a reasonable excuse, such as for a late return or payment, or if they miss a deadline, for example being late to accept an offer of a review or to appeal a decision. Reasons not accepted include a bounced cheque, payment failure due to insufficient funds, difficulty using the HMRC online system, not receiving a reminder, or making a mistake on the tax return.
HMRC’s Response
An 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.”
He added: “Those who believe they’ve incorrectly received a penalty for filing late can appeal. We can cancel penalties when a reasonable excuse is provided.”
