An HMRC nudge letter is not a formal enquiry. It is a prompt, sent to a group of people HMRC believes may have undeclared income or gains, asking you to check your tax position and correct it if needed. If you have received one, you should not ignore it: read it carefully, check the years and income it points to, and either confirm your tax is right or make a disclosure through the correct HMRC facility before HMRC opens a formal check itself.
What is an HMRC nudge letter?
A nudge letter is part of HMRC's "one-to-many" campaign: the same letter sent to many taxpayers who share a risk indicator, rather than a letter that follows an individual investigation into you specifically. HMRC builds these mailing lists from data it already holds or has received, including from banks, land registries, letting agents, cryptoasset exchanges and other tax authorities under international exchange-of-information agreements.
Common triggers include:
- Overseas bank or investment accounts flagged through the Common Reporting Standard, which over 100 countries use to exchange account information
- Rental income from a UK property that does not appear to match your Self Assessment return
- Cryptoasset disposals reported by an exchange
- Income or gains connected to an offshore structure, trust or company
The letter does not mean HMRC has proof you owe tax. It means your name appears on a list HMRC considers worth writing to. Some recipients owe nothing at all.
What is a certificate of tax position?
Some nudge letters are accompanied by a certificate of tax position: a form asking you to declare, in writing, either that your UK tax affairs are complete and correct or that they are not and you intend to correct them. Signing a certificate of tax position that turns out to be false is a serious step. If you have any doubt about whether your affairs are complete, do not sign the certificate until you have checked, and take advice first if the position is unclear or the sums could be significant.
Is a nudge letter the same as a tax investigation?
No. A nudge letter is a prompt to self-review, not a notice that HMRC has opened a compliance check or enquiry under its formal powers. That said, HMRC treats how you respond as evidence of your behaviour. Ignoring the letter, or responding carelessly, can turn a one-to-many prompt into a full enquiry, and in the more serious cases, into a Code of Practice 9 investigation where HMRC suspects deliberate fraud. Our tax investigations page covers how formal HMRC enquiries and interventions work if that stage is reached.
What should I do when I get one?
Work through the letter methodically rather than reacting to it. The table below sets out the practical sequence.
How does the disclosure process actually work?
Once you notify HMRC through the Worldwide Disclosure Facility, HMRC gives you a unique disclosure reference number, and you then have 90 days to gather your figures and submit the full disclosure. HMRC aims to acknowledge a completed disclosure within 15 days of receiving it, and to write with its intended course of action within 90 days of that acknowledgement, though it has noted response times can run longer when volumes are high. If your disclosure is complex, you can ask for an additional 90 days before submitting, giving up to 180 days in total.
As part of the disclosure you are asked to self-assess your own behaviour, for example whether an error was careless or deliberate, because this determines how many years HMRC expects you to go back and feeds into the penalty calculation. Getting this self-assessment wrong is itself a risk: HMRC's guidance is explicit that if you are unsure how to categorise your behaviour, you should seek professional advice before you submit. Penalty rates depend on your behaviour category and the facility used. HMRC's factsheets and calculators, linked from the disclosure service pages above, set them out for your case.
Worked example
Example. Priya receives a nudge letter referencing an offshore account reported to HMRC under the Common Reporting Standard. She checks her Self Assessment returns for the last four tax years and finds she declared UK income correctly but omitted interest earned on savings held in an account overseas, worth around £180 a year in interest.
Because the issue is offshore, she needs the Worldwide Disclosure Facility rather than the general "tell HMRC about underpaid tax" service. She notifies HMRC online, receives her disclosure reference number, and has 90 days to complete the disclosure itself. Within that window she works out, with her adviser, which years are affected, what behaviour category applies (in her case, an oversight rather than anything deliberate), and calculates the tax, interest and penalty due using HMRC's published calculators before submitting. Because her situation is straightforward and she disclosed promptly and fully, she is not treated the same as someone who ignored the letter or who under-declares a second time.
What this means in practice
Some parts of this you can do yourself. Reading the letter carefully, pulling together your bank statements, exchange records or rental accounts, and identifying which tax years are in scope are all things you can start today without help.
Other parts benefit from an adviser, particularly self-assessing your behaviour category, calculating interest and penalties correctly, and deciding whether to use the Worldwide Disclosure Facility, the Let Property Campaign, or the general disclosure service. Getting the wrong facility or the wrong behaviour category can slow the process down or attract a higher penalty.
If HMRC's letter suggests it already suspects deliberate under-declaration, or if you are worried your own conduct could be seen as deliberate, that is a different and more serious conversation. Our Code of Practice 9 page explains what that process involves; we would rather you read that and call us than sign a certificate of tax position you are not sure about.
FAQ
Do I have to reply to an HMRC nudge letter?
There is usually no legal obligation to reply to the letter itself, but ignoring it does not make the underlying tax position go away. If your affairs need correcting, HMRC expects you to come forward, and delay is treated less favourably than a prompt, voluntary disclosure.
What happens if I ignore a nudge letter?
HMRC may follow up, and if it later opens a formal compliance check or enquiry on the same issue, you lose the benefit of having corrected the position voluntarily. This can affect both the penalty and, in serious cases, whether HMRC treats the matter as a civil or criminal issue.
Should I sign the certificate of tax position?
Only sign it once you are confident it is accurate. If you have not checked thoroughly, or you are not sure whether something needs disclosing, get advice first rather than signing on a deadline.
Which disclosure facility do I use?
It depends on the issue: offshore income or assets generally go through the Worldwide Disclosure Facility, undeclared UK rental income often qualifies for the Let Property Campaign, and other undeclared income or gains from previous years use HMRC's general digital disclosure service. Using the wrong one can delay your disclosure.
Can a nudge letter turn into a full investigation?
Yes. If HMRC is not satisfied with your response, or believes the understatement was deliberate, it can open a formal enquiry, and in the most serious cases a Code of Practice 9 investigation. How you handle the nudge letter stage affects that risk.
Talk to us before you respond
If you have received a nudge letter or a certificate of tax position and are not sure what it means for you, speak to Ghulam Alahi, Managing Director, who leads our work on Code of Practice 9 and serious HMRC enquiries, before you reply to HMRC or sign anything. The first conversation is about understanding what HMRC has asked, what it does and does not tell you, and what your options are. Call 020 8554 2135 or email info@visionconsulting.co.uk, or get in touch via our contact page.
By the Vision Consulting team.
This is general information, not advice. Your position depends on your circumstances.