HM Revenue and Customs (HMRC) would treat a known tax error left uncorrected as deliberate under draft rules due to take effect on 1 April 2028.
The change would affect anyone who files a return or other document covered by penalty rules in Schedule 24 to the Finance Act 2007, and the advisers who act for them, HMRC said.
The Treasury said the draft introduces "an explicit obligation on taxpayers to take reasonable action to correct errors once they are identified".
The government published the draft legislation on 13 July ahead of inclusion in the next Finance Bill. The Treasury said the final contents of the Finance Bill 2026-27 will be decided by the Chancellor at the next Budget.
Where a taxpayer becomes aware of an inaccuracy and does not take reasonable steps to correct it or notify HMRC, the error would be treated as deliberate for penalties and for the time limits on assessments.
The duty would apply only where HMRC is still within its existing time limits for making assessments.
HMRC would also gain a power to issue a Customer Correction Notice, which requires a taxpayer to check their position and either correct the inaccuracy or explain why no correction is needed.
The notice can be sent where HMRC has reason to suspect an inaccuracy. The taxpayer must respond by correcting it, making a disclosure or confirming that no correction is required.
Careless-error penalties removed after a first notice within 6 years
Penalties for careless errors would be removed where a taxpayer makes an unprompted disclosure, or takes reasonable steps to secure a correction after a first notice within a six-year period.
Errors that HMRC finds later, after scrutinising a response or a lack of response to a notice, would be presumed careless.
The presumption falls away if the error was deliberate, in which case the deliberate treatment applies, or if the taxpayer shows they took reasonable care in the first instance.
HMRC said individuals and businesses may face increased penalties where known inaccuracies are not reported, and for failing to respond appropriately to a notice. Current law on penalties for inaccuracies is in Schedule 24 to the Finance Act 2007.
31% of Self-Assessment returns contain inaccuracies
HMRC estimates that 31% of Self-Assessment returns contain inaccuracies resulting in undeclared tax.
The share is higher for business filers: an estimated 42% of Self-Assessment returns from businesses and 55% of company tax returns from small businesses.
Many taxpayers already correct mistakes, HMRC said. About 180,000 amendments increasing tax due were made to Income Tax Self-Assessment returns for the tax year ending 5 April 2024.
HMRC expects the overall experience of dealing with it to stay the same, and described the policy intent as making correction "a simple and smooth process". It expects a negligible administrative impact on businesses, though one-off costs could include familiarisation and seeking advice on receiving a notice.
The measure is not expected to have any significant macroeconomic impact. HMRC will need IT changes at an estimated cost of £5m, and the Exchequer impact is left blank pending scrutiny by the Office for Budget Responsibility at a future fiscal event.
Eight-week consultation ran to 7 September 2026
The measure follows an autumn 2024 consultation on ways to tackle non-compliance. The summary of responses in spring 2025 committed the government to exploring more efficient self-correction, and the summer 2025 Transformation Roadmap carried the plan forward.
The government confirmed at Budget 2025 that it would publish draft legislation in 2026. An eight-week technical consultation on the draft ran from 13 July to 7 September 2026.
The Chancellor is due to decide the Finance Bill’s final contents at the next Budget.
