HMRC penalty calculator

The calculator needs JavaScript. The tables below give the same ranges, and the worked example shows how HMRC sets a penalty within them.

How the calculator works

An HMRC penalty for an error in a return, or for failing to tell HMRC that tax was due, is a percentage of the potential lost revenue: broadly, the extra tax due once the problem is put right. The calculator follows the method HMRC sets out for its own officers in the Compliance Handbook.

1. Find the maximum and minimum penalty for the behaviour, and for whether the disclosure was prompted (the tables below).
2. Score the quality of the disclosure: telling counts for up to 30%, helping for up to 40% and giving access for up to 30%.
3. Apply that score to the gap between the maximum and the minimum, and take the result off the maximum.
4. Apply the percentage to the potential lost revenue.

An example, with figures chosen for the illustration: a careless error has understated tax by £10,000, the disclosure was prompted, and the quality of the disclosure is scored at 70%. The range is 15% to 30%, a gap of 15 points. Seventy per cent of 15 is 10.5, so the penalty is 19.5%, or £1,950. Had the same disclosure been unprompted, the range would be 0% to 30% and the penalty9%, or £900.

Penalty ranges for an error in a return

These come from Schedule 24 to the Finance Act 2007, which covers inaccuracies in returns and documents for most taxes, including income tax, capital gains tax, corporation tax and VAT.

A penalty for a careless error can be suspended for up to two years. If HMRC sets conditions and they are met, the penalty is cancelled. Deliberate penalties cannot be suspended.

Penalty ranges for failing to notify HMRC

These come from Schedule 41 to the Finance Act 2008, which covers failures to tell HMRC that tax is due, such as not registering for Self Assessment. Deliberate failures use the same ranges as deliberate errors. Failures that were not deliberate turn on how soon HMRC learnt of them, measured from when the tax first went unpaid.

A penalty for a failure to notify that was not deliberate can be cancelled if there was areasonable excuse and HMRC was told without unreasonable delay once the excuse ended.

Why a delay of more than three years matters

Timing is part of the quality of a disclosure. Where a disclosure starts more than three years after the problem first arose, HMRC’s practice is to cut the gap between the maximum and the minimum by 10 percentage points before applying the reduction for telling, helping and giving access. The result is that the penalty would not normally fall below the minimum plus 10 points.

For an unprompted careless error, for example, the range is 0% to 30%. With the restriction, the most the penalty can be reduced by is 20 points, so even a full disclosure would leave a penalty of 10%.

For an error, the three years run from when the return containing it was sent to HMRC. For a failure to notify, the restriction applies only where the failure was deliberate: the ranges for a failure that was not deliberate already rise after 12 months. HMRC can decide not to apply the restriction, for example for a one-off error the person would have had no reason to revisit.

What the calculator does not cover

• Offshore matters. Where income tax, capital gains tax or inheritance tax is involved and the matter is offshore, the ranges depend on the territory and can reach 200%. See our guide to HMRC penalties for careless and deliberate errors and the Worldwide Disclosure Facility.
• Late filing and late payment penalties, which run under separate rules: see late filing penalties and penalty points.
• Interest, which is charged on the tax as well and is not reduced for a good disclosure.
• Special reductions, which HMRC can make in special circumstances, and the special rules for working out potential lost revenue, for example for losses or tax that was only paid late.

If HMRC has charged a penalty

A penalty is a decision that can be appealed, normally within 30 days of the date on the notice. The behaviour category, whether the disclosure was prompted, the reduction given and a refusal to suspend can each be challenged. Our page on penalty appeals explains how we approach them, and our guide to appealing an HMRC decision covers review and the tribunal.

Further reading

• HMRC penalties for careless and deliberate errors
• Voluntary disclosures
• How far back can HMRC investigate?
• HMRC’s deliberate tax defaulters list