A penalty for an inaccuracy in a tax return is a percentage of the extra tax the error would have cost, which HMRC calls the potential lost revenue, and the percentage depends on why the error happened. Under HMRC factsheet CC/FS7a (updated 21 July 2026) there is no penalty for a mistake made despite reasonable care, and where you tell HMRC before you have any reason to believe it has found the error, or is about to, the ranges are 0% to 30% for a careless error, 20% to 70% for a deliberate one and 30% to 100% where it was deliberate and concealed, with minimums of 15%, 35% and 50% where the disclosure is prompted. A careless penalty can be suspended for up to 2 years on conditions; a deliberate one cannot. Correct as at 13 September 2026.
What are the penalties for inaccuracies reported to HMRC?
Schedule 24 to the Finance Act 2007 sets a standard penalty of 30% of the potential lost revenue for a careless inaccuracy, 70% for a deliberate one and 100% for one that is deliberate and concealed, and each figure comes down inside a range according to how and when you disclosed.
Late filing and late payment are separate regimes, and failing to tell HMRC about a new source of income at all is charged under factsheet CC/FS11.
| Behaviour | Unprompted disclosure | Prompted disclosure |
|---|---|---|
| Reasonable care | No penalty | No penalty |
| Careless | 0% to 30% | 15% to 30% |
| Deliberate | 20% to 70% | 35% to 70% |
| Deliberate and concealed | 30% to 100% | 50% to 100% |
Source: HMRC factsheet CC/FS7a, updated 21 July 2026; percentages of potential lost revenue.
Potential lost revenue is the additional tax due as a result of correcting the inaccuracy (Schedule 24, paragraph 5). The penalty is a percentage of that figure, never of the whole tax bill, and interest on the tax itself is charged separately.
What is the difference between careless and deliberate?
Careless means you failed to take reasonable care to get the return right; deliberate means you knew the return was inaccurate when you sent it; deliberate and concealed means you knew and took active steps to hide it from HMRC.
Reasonable care, in HMRC's words, depends on each person's abilities and circumstances, and handing the return to an adviser does not remove your duty to prevent inaccuracies.
The label also fixes how many years HMRC can go back to assess; see how far back HMRC can go.
How does telling HMRC reduce the penalty?
HMRC moves a penalty from the top of its range towards the bottom for the quality of your disclosure, weighted up to 30% for telling, up to 40% for helping to quantify the error and up to 30% for giving access to records (CC/FS7a; Compliance Handbook CH82430). The three scores are added, and the total is applied to the gap between the maximum and the minimum of the range, as the calculation example in CC/FS7a shows. HMRC sets out how the three scores are combined into a single quality percentage at CH82432.
A disclosure is unprompted if you tell HMRC before you have any reason to believe it has discovered the inaccuracy or is about to; anything later is prompted. If the disclosure takes 3 years or more, HMRC usually restricts the maximum reduction to 10 percentage points above the minimum.
Offshore inaccuracies carry maxima of up to 200% of the tax by territory category under factsheet CC/FS17, covered in our guide to offshore income and the Worldwide Disclosure Facility.
Example
Example. A sole trader's 2024/25 return omitted £25,000 of income from an online platform. HMRC opens a compliance check from third-party data, so the disclosure is prompted. Take the potential lost revenue as an assumed £10,000.
HMRC accepts the error was careless. The prompted careless range is 15% to 30%, a gap of 15 percentage points (CC/FS7a, updated 21 July 2026). With full marks for telling (30%), helping (40%) and access (30%), the whole 15 points come off and the penalty is 15% of £10,000, which is £1,500.
Had the trader written to HMRC before any letter arrived, the range is 0% to 30% and full cooperation takes the penalty to nil. Had HMRC argued the omission was deliberate, the prompted range is 35% to 70%, full cooperation leaves £3,500, and suspension is not available.
With careless accepted, HMRC could suspend the £1,500 for up to 2 years on a condition of the kind factsheet CC/FS10 describes, such as reconciling platform statements to the accounting records each month. Interest on the £10,000 runs until it is paid.
When can a suspended penalty be agreed?
HMRC can suspend a penalty for a careless inaccuracy, for a maximum of 2 years, if it can set conditions that would help you avoid a further careless penalty, and it cancels the penalty at the end of the period if you meet them (CC/FS10; Schedule 24, paragraph 14). It cannot suspend a penalty for a deliberate inaccuracy, an error attributable to another person, or a failure to notify an under-assessment (CH83142).
Each condition must be SMART in the factsheet's sense: specific to the cause of the inaccuracy, measurable so you can show it was met, achievable and realistic, and met before the suspension ends. HMRC will not suspend where no such condition can be set or where it thinks compliance is unlikely, and says suspension is unlikely where the penalty arose from a tax avoidance scheme. Its manual adds a one-off event or a mistake with no systemic cause (CH83143).
Another inaccuracy penalty during the suspension makes the suspended amount payable. A refusal to suspend can be appealed within 30 days; the decision at the end that a condition was not met cannot.
Can HMRC reduce a penalty for special circumstances?
Yes. Schedule 24, paragraph 11 lets HMRC reduce a penalty for special circumstances, though the Act says ability to pay is not one. HMRC's manual requires factors the legislation does not already provide for, so reasonable care and disclosure quality cannot count twice (CH170600), and any reduction needs authority from its Specialist Technical Team (CH170100). It is rarely the route; most of the movement is in the behaviour category and the three reductions.
How do I appeal an inaccuracy penalty?
You usually have 30 days from the date of the penalty notice to appeal to HMRC, and the appeal can go on to the tax tribunal (GOV.UK, disagree with a tax decision or penalty). HMRC can offer a review first; it is carried out by someone not involved in the original decision, usually takes 45 days, and you usually have 30 days after the outcome to go to the tribunal (GOV.UK, review of a tax or penalty decision). Paragraph 15 lists what can be appealed: whether a penalty is due, its amount, a decision not to suspend, and the conditions set. The penalty need not be paid before the appeal is determined (Schedule 24, Part 3, paragraphs 15 and 16), though interest continues on the tax in dispute.
If the letter contains a category or a percentage you do not accept, our HMRC penalty appeal service is where the work starts. While the compliance check is still open, the penalty is tax investigations work.
What to do now
Read the penalty explanation letter and find the behaviour category HMRC has applied, the potential lost revenue figure and the percentages given for each reduction. Put the 30-day date from the notice in your calendar.
You can check the arithmetic against the CC/FS7a ranges, gather the records that show what care you took, and note whether HMRC or you raised the error first. Arguing a category down, drafting suspension conditions and running an appeal are adviser work.
What we do when a penalty letter arrives
We ask first for the penalty explanation letter or schedule and the compliance-check correspondence, because the letter states the category, the potential lost revenue and each reduction. We test the category against the CC/FS7a definitions and the records of what care was actually taken; a deliberate finding is examined against what was known when the return was sent.
We work the three reductions from the correspondence record and set out where they do not match what was provided. For a careless penalty we put a written suspension proposal to HMRC in the SMART form CC/FS10 requires. Where the 30 days have not run out we lodge the appeal, ask for the review where that is the right first step, and take the matter to the tribunal where it is not resolved.
If the letter and the records show HMRC's category is right and the reductions are already at the minimum, we will say so, and the work is then the suspension conditions or the payment terms.
Frequently Asked Questions
None if you took reasonable care. A careless error carries 0% to 30% of the potential lost revenue, or 15% to 30% if HMRC prompted the disclosure; a deliberate error 20% to 70%, or 35% to 70% prompted; a deliberate and concealed error 30% to 100%, or 50% to 100% prompted (CC/FS7a, updated 21 July 2026).
For an inaccuracy in a return, a percentage of the potential lost revenue set by behaviour: nothing for reasonable care, 0% to 30% careless, 20% to 70% deliberate and 30% to 100% deliberate and concealed, with minimums of 15%, 35% and 50% where HMRC prompted the disclosure (CC/FS7a, updated 21 July 2026). Late filing, late payment and failure to notify are separate regimes with their own factsheets.
The ordinary time limit for HMRC to assess tax is 4 years after the end of the tax year, extended to 6 years for careless conduct and 20 years for deliberate conduct. The same behaviour label sets both; see how far back HMRC can investigate.
Yes. If every suspension condition is met by the end of the period, which can be up to 2 years, HMRC cancels the penalty. If a condition is missed, or another inaccuracy penalty arises during the suspension, the suspended penalty becomes payable. Careless inaccuracies only (CC/FS10).
Talk to Zaman Khan about an inaccuracy penalty
The first conversation covers the penalty letter, the year in question, what HMRC has said about behaviour and what records show how the return was prepared. Zaman Khan, Senior Manager, works on the firm's tax investigation and HMRC penalty files. Call 020 8554 2135, email info@visionconsulting.co.uk or use the contact page.
About Vision Consulting. Vision Consulting is a firm of chartered accountants and registered auditors, regulated by ICAEW, with offices in the City of London (the Gherkin, 30 St Mary Axe), the West End (33 Cavendish Square) and Gants Hill, Ilford. The firm provides year-end accounts, bookkeeping, payroll and tax compliance, including Making Tax Digital and VAT, for individuals, landlords, directors and businesses. Its specialist teams provide audit and assurance (company and charity audits and audit-exemption advice), probate and estate administration (the firm is licensed for non-contentious probate), inheritance-tax and estate planning, HMRC tax investigations and voluntary disclosures, property and landlord taxation, and corporation-tax and company advisory.
By the Vision Consulting team.
This is general information, not advice. Your position depends on your circumstances. Speak to us before acting on anything here.