New data reveals that HM Revenue & Customs (HMRC) is adopting a significantly stricter approach to appeals against late tax penalties, cancelling the lowest proportion of fines in four years.
Sharp Decline in Penalty Cancellations
According to figures from leading accountancy firm Price Bailey, HMRC cancelled just 11% of late-payment penalties in the 2022/23 tax year. This equates to 91,000 cancellations out of 857,000 penalties issued, leaving a substantial 766,000 fines that taxpayers were required to pay.
This marks a notable drop from the 16% cancellation rate seen in 2019/20. The trend is mirrored for late-filing penalties, where the cancellation rate fell sharply to 23% (674,000 out of 2.97 million) in 2022/23, down from 39% (1.2 million out of 3.1 million) in 2019/20.
Why HMRC's Firmer Stance Matters for Taxpayers
Nikita Cooper, a Director at Price Bailey, commented on the findings, stating: "The data suggests HMRC is taking a firmer line on cancellations. That makes it even more important for taxpayers to act early, because once a penalty is raised it is becoming harder to get it overturned."
She emphasised that many penalties are avoidable. A significant number of people are unaware they need to file a return, while those struggling to pay can often avoid charges by engaging with HMRC promptly. Most late-payment penalties can be avoided if a taxpayer contacts HMRC and agrees a Time to Pay arrangement within 30 days of the due date.
Acting early can prevent all three escalating stages of late-payment penalties, which together can amount to a hefty 15% of the tax owed.
New Crypto Rules Could Catch Thousands Unaware
Ms Cooper also issued a specific warning regarding new reporting requirements for crypto-assets. "The new crypto-asset reporting rules mean more people will fall into the Self-Assessment system without realising it," she said.
She advised that anyone involved in trading or disposing of cryptocurrency should check if they now have a filing obligation, even if the transaction amounts seem small. Failure to do so could result in unexpected penalties.
The overall message from tax experts is clear: with HMRC showing less leniency, proactive communication and early action are now crucial for UK taxpayers to avoid costly fines.
