HMRC Draft Law Could Make Uncorrected Errors "Deliberate"

Tax Queen

Tax Expert @ Pie

4 min read

HMRC published draft legislation last week introducing a new legal duty for taxpayers to take "reasonable action" to correct errors in their tax affairs once they become aware of them. The measure is set to be included in the Finance Bill 2026-27 and would apply across the tax system, including self assessment for sole traders, freelancers, and landlords. A commencement date has not yet been specified.

What Is HMRC's Customer Correction Notice

The draft legislation gives HMRC a new power to issue a customer correction notice, requiring a taxpayer to check their tax position and either correct an inaccuracy or explain why no correction is needed.

It closely resembles the Requirement to Correct (RTC) duty introduced under the Finance (No. 2) Act 2017, which required taxpayers with undeclared offshore tax liabilities to self-correct by a set date, backed by penalties of up to 200%. The new duty extends a similar principle across the whole tax system, rather than just offshore matters

For anyone filing self assessment, it's worth revisiting the most common self-assessment mistakes that lead to penalties, since those same low-level errors are exactly the kind this duty is designed to catch

Woman calculating expenses using a calculator, receipts, and paperwork at her desk"

Why Uncorrected Errors Could Be Treated As Deliberate

The stakes here are higher than a standard correction. If a taxpayer fails to comply with the new duty to correct, the inaccuracy is treated as deliberate for penalty purposes under Schedule 24 of the Finance Act 2007.

Law firm Eversheds Sutherland has warned this significantly increases potential penalty exposure, since deliberate-behaviour penalties are calculated at a far higher percentage of the tax at risk than penalties for careless errors

Under the current rules, an error is generally only treated as deliberate where a taxpayer knowingly gives HMRC an inaccurate document, intending HMRC to rely on it.

Law firm Freshfields has noted that the First-tier Tax Tribunal has, in some cases, treated an allegation of deliberate conduct as effectively an allegation of fraud, and deliberate-penalty cases are usually investigated by HMRC's Fraud Investigation Service, with a risk of escalation to a criminal investigation.

This is a good moment to be clear on how to amend a self assessment return once you've already filed, since acting quickly once you spot a mistake is likely to matter more under this duty than it has before.

Regularly reviewing your tax position, whether through HMRC's own services or a platform like Pie, makes it far easier to catch and correct issues before they become a bigger problem

How HMRC Defines "Awareness" Of An Error

Eversheds Sutherland has also flagged uncertainty over how "awareness" of an error would be defined in practice, particularly for corporate taxpayers, where it's unclear whether the duty would apply only to the taxpayer itself, or extend to knowledge held by advisors or employees who see relevant information without direct responsibility for tax compliance.

Freshfields has raised similar concerns, warning that extending these powers across the full range of corporate taxes could create a significant compliance burden for multinational groups with complex tax affairs, where inaccuracies can arise inadvertently in the ordinary course of business

Man filling in a paper tax form while using a laptop and calculator app on his phone

How This Compares To HMRC's 2024 Proposal

It's worth noting this isn't the same power that was floated in an earlier 2024 proposal, which would have applied specifically where large numbers of taxpayers made the same minor error, potentially through automated self-correction notices. HMRC's explanatory note for this new draft legislation does not include that limitation.

A ministerial statement instead describes the aim as resolving simple, common issues more quickly and improving consistency by setting a clear expectation that taxpayers self-correct.

This builds on a direction HMRC has already been signalling through its wider Making Tax Digital rollout, which pushes taxpayers towards more frequent, accurate digital records rather than a single annual filing.

What Happens Next

The draft legislation is open to technical consultation until 7 September 2026. No prior consultation has been held specifically on this version of the power, so the final shape of the rules, including any safeguards around how "awareness" is assessed, may still change before the Finance Bill is finalised.

Taxpayers moving onto MTD for Income Tax Self Assessment can check the deadlines and requirements they'll need to meet, since the more frequent reporting involved is likely to surface errors sooner rather than later

What This Means For Self Assessment Taxpayers

While much of the law firm commentary so far has focused on corporate and cross-border implications, the "reasonable action" duty is intended to apply across the whole tax system, which includes self assessment.

For sole traders, freelancers, and landlords, this raises the stakes around spotting and fixing errors early, given that an uncorrected error could now be treated as deliberate rather than careless.

It's also worth reading how to prepare for MTD for Income Tax Self Assessment ahead of time, since accurate digital records will matter under both MTD and this new duty to correct. See how Pie Tax tracks your income and expenses in real time, which reduces the risk of the kind of errors this legislation is aimed at

Staying Ahead Of HMRC's New Correction Duty

With uncorrected errors now potentially carrying deliberate-behaviour penalties, accurate record-keeping matters more than it used to.

Waiting until year end to piece together your income and expenses leaves far more room for the kind of small, avoidable mistakes this new duty is aimed at, and far less time to catch them before HMRC does.

Curious about why sole traders, freelancers, and landlords choose Pie Tax? Learn more about the team behind Pie Tax, or get started today.