Your rights and safeguards 5: Penalties

Updated on 13 April 2023

We outline the rights and safeguards the law gives you when HMRC charge you a penalty.

Illustration of people around a laptop with a penalty document

This page aims to expand the information given in HMRC’s own compliance factsheets. It also adds to information given about your rights in the HMRC Charter.

What to do if you disagree

You can appeal if you think that:

HMRC should not have charged you a penalty at all, or
they have charged you too much.

For example, HMRC may have charged you a penalty on the basis that an error in a document or tax return was deliberate. You may think that it was only careless, in which case your penalty should be lower. Or you may think that you made the error despite having taken reasonable care to get things right, in which case no penalty would be due.

Alternatively, you may think that you deserve more credit for having told HMRC about the error, and helping them to correct it, than they have given you.

See factsheets CC/FS7a and CC/FS7b for details on how HMRC calculate penalties for errors in returns or documents.

Suspension of penalties

Where HMRC charge you a penalty for a careless mistake in a return or document, the law allows them to suspend payment of the penalty. HMRC’s factsheet CC/FS10 covers suspension. If HMRC refuse to suspend a penalty or set suspension conditions that you wish to challenge, you can appeal.

Failure to notify

HMRC can charge a penalty if you do not tell them about certain changes which affect your liability to tax – for example, if you start receiving a new source of income which triggers the need to complete a Self Assessment tax return. HMRC’s factsheet CC/FS11 covers these penalties in more detail.

This penalty regime is subtly different from that for penalties for inaccurate returns in that there are only three categories of failure:

deliberate non-notification
deliberate non-notification with concealment, and
any other kind (that is, non-deliberate)

However, no penalty arises if there is a reasonable excuse for the failure.

Unfortunately, the law does not allow HMRC to suspend this type of penalty, but there are provisions for ‘special reduction’. These allow HMRC, in special circumstances, to reduce or stay a penalty, or otherwise agree a compromise. In deciding whether to apply these provisions, HMRC may not take account of ability to pay or the fact that tax might have been overpaid elsewhere which could balance out the underpayment giving rise to the penalty.

How to appeal

If you decide to appeal against a penalty or suspension decision, you must usually do so within 30 days by sending HMRC a written notice that you wish to appeal. You can then decide whether you wish your appeal to be heard by the First-tier Tribunal, or reviewed by a different team within HMRC.

If the latter, you still have the right to appeal to the First-tier Tribunal against the decision of the review team. For more detail see factsheet HMRC1.

Tax guides

Introduction to the tax system How do I work out my tax? What income is taxable? What tax allowances am I entitled to? What tax rates apply to me? How is my tax collected? What if I cannot pay my tax bill? Do I need to complete a tax return? Self Assessment: understanding the basics What is Simple Assessment? How do I claim tax back? How do I claim back tax I have overpaid through PAYE on wages or pensions? How do I claim back tax if I complete a tax return? How do I claim back tax if I am taxed under the Construction Industry Scheme (CIS)? How do I claim back tax on savings income? How do I claim a marriage allowance refund? How do I claim back tax on a payment protection insurance (PPI) pay-out? Should I use a tax refund company? What is National Insurance? How do I get a National Insurance number? What are Specified Adult Childcare credits? What is Scottish income tax? What is devolution? Do I have to pay Scottish income tax? How does Scottish income tax work? What is Welsh income tax? Do I have to pay Welsh income tax? Do I have to join a pension scheme? Tax relief on your pension contributions HMRC digital services Enquiries, penalties, appeals, complaints and debt Enquiries How to survive an enquiry by HMRC Tax penalties Tax appeals Alternative Dispute Resolution How do I complain to HMRC? What if I cannot pay my tax bill? What if I have a tax credits overpayment?

Am I employed, self-employed, both or neither? Working through a limited company What is the national minimum wage? How do I work out my tax? What income is taxable? What tax allowances am I entitled to? What tax rates apply to me? How is my tax collected? How is tax collected on taxable state benefits? How do I check my coding notice? Do I need to complete a tax return? What tax do I pay on redundancy payments?Employment benefits and expenses What are benefits-in-kind? What payments and benefits are non taxable? What if I incur expenses in relation to my job? What travel expenses can I claim? What if I use my own car for business purposes? Payroll giving Allowances and expenses paid to armed forces personnel and deductions from their income Pensions and employees What is automatic enrolment for employees? What National Insurance do I pay as an employee? How do I repay my student loan? What if I do not pay enough tax? What if I pay too much tax? What if I work abroad temporarily? What if I am in the armed forces and work overseas? First time workers Apprenticeships

Am I employed, self-employed, both, or neither? How do I register for tax and National Insurance? What business records should I keep? Working out profits, losses and capital allowances When do I make Self Assessment payments and file my tax return? How do I pay tax on self-employed income? What tax allowances am I entitled to? What is the trading allowance? What National Insurance do I pay if I am self-employed? What is the Construction Industry Scheme (CIS)? Tax checks for taxi, private hire and scrap metal licences How do I work out my profits for universal credit? Do I have to pay VAT if I am self-employed? What is Making Tax Digital for VAT? Pensions and self-employment How do I repay my student loan if I am self-employed? Introduction to enquiries

Tax status Setting things up How the Pay As You Earn system works Taking on a new employee Reporting PAYE in real time Pay and deductions Ongoing payroll tasks End of year processes Employee leaving Employment law Keeping records Getting things wrong Getting more help

Can I live and work in the UK? Residence and Domicile Employment and self-employment National Insurance for migrants Coming to the UK to study Other migrant issues EU and EEA countries

Going abroad Other income Student loans Types of student Volunteering and training Working Do students have to pay council tax? Glossary of Forms Jargon buster Where can I get further help and information?

Help for employees and the self-employed Help for employers Independent living Caring for someone VAT reliefs for disabled and older people Trusts for disabled people Apprenticeships and disability

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Taxes on death: overview Dealing with the deceased's own tax affairs Tax on income and gains after death Death of a spouse or civil partner Joint property on death Pension and life assurance policies on death Income from a deceased's person's estate Inheritance tax reliefs and exemptions State benefits on death Getting help with bereavement and inheritance tax Bereavement jargon buster

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