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What You Need to Know About Penalties for Inaccuracy in Returns and Documents: A Comprehensive Guide

Penalties for Inaccuracy in Returns and Documents
Filing taxes can be a stressful and confusing process, and the last thing anyone wants is to receive an error penalty from HMRC. Penalties can range from a few hundred pounds to thousands and can be a significant source of stress and financial burden for taxpayers. In this guide, we’ll provide an overview of error penalties for inaccuracy and offer some tips on how to avoid them.

Inaccuracy Penalties

Inaccuracy penalties are charged when a taxpayer makes an error on their tax return or provides inaccurate information because of their carelessness, leading to underpaying tax. These penalties are calculated based on the additional tax owed due to inaccuracy and can range from 0% to 100% of the extra tax owed. The exact percentage depends on the type of inaccuracy (carelessness, recklessness, or deliberate errors) and the case’s circumstances.

When making errors on your tax return, there are three levels of culpability: careless, deliberate, and deliberate and concealed.

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    Careless Behaviour

    These are those where you have failed to take reasonable care when preparing your tax return. This could be due to an oversight or lack of attention to detail. An example of this would be making a mistake when calculating your business expenses.

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    Deliberate Behaviour

    These are those where you knew that your tax return was inaccurate when submitting it to HMRC. These inaccuracies can include overestimating your expenses or underreporting your income. Other examples of deliberate inaccuracies include paying employees off the books or failing to account for Pay As You Earn (PAYE) taxes.

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    Deliberate & Concealed Behaviour

    These are the most severe form of inaccuracy. This occurs when you know that your tax return was inaccurate and then take steps to actively conceal the error from HMRC. An example of this would be creating a false invoice to cover up a non-existent stock purchase. The penalties for deliberate and concealed inaccuracies are the most severe and can result in a penalty of up to 100% of the additional tax owed.

Penalty Calculation

For unprompted disclosure, being careless can lead to a penalty of 0% to 30%. On the other hand, deliberate and concealed errors can result in a penalty of up to 100%, and deliberate errors can result in a penalty of 20% to 70%. 

For Prompted Disclosure, penalties increase to 15%, calculating 15% to 30% for carelessness and 35% to 70% for deliberate and concealed errors, and will be calculated as 50% to 100%.

How to Avoid Inaccuracy Penalties

The best way to avoid error penalties is to take the time to carefully review your tax return before submitting it. Double-check all figures and ensure that all information is accurate and up-to-date. If you’re unsure about something, seek advice from a tax professional or use HMRC’s online help resources.

In addition, it’s essential to notify HMRC of any changes in circumstances as soon as possible. This will help ensure that your tax liability is correctly calculated and prevent the need for a costly penalty.

If you do receive an inaccuracy penalty, don’t panic. You can appeal the decision and provide evidence to support your case. If you show that the error was due to an honest mistake or misunderstanding or that you took reasonable care to ensure accuracy, HMRC may waive or reduce the penalty.


Error penalties can be a costly and stressful consequence of making mistakes on your tax return. However, by taking a proactive approach and seeking advice when needed, you can reduce the risk of errors and minimise the impact of any penalties that may arise. Remember to double-check all information, notify HMRC of any changes in circumstances, and seek advice when needed. With some preparation and attention to detail, you can ensure accurate tax returns and avoid costly error penalties.

Pro Tip: Outsource Your Tax Calculation and Submission to Avoid Mistakes

If you want to minimise the risk of errors and avoid the stress of filing taxes alone, consider outsourcing your tax calculation and submission to a professional service. Working with a team of experienced tax professionals ensures your tax return is accurate and complies with all relevant regulations.

Star Sterling Outsource offers comprehensive tax outsourcing services, including tax preparation, calculation, and submission. Our team of accounting experts can help you navigate the complex world of tax regulations and ensure that your tax return is accurate and complete. With our services, you can reduce the risk of errors and avoid costly penalties from HMRC.

Contact us today to learn more about our tax outsourcing services and how we can help you file your taxes confidently. We'll happily answer any questions and provide a custom quote tailored to your needs.

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