A Finance Bill clause that had its first reading in Parliament on 9 November 2026 will introduce a new statutory Duty to Correct for UK taxpayers from April 2028, legally requiring anyone who becomes aware of a mistake on an old tax return to fix it. Under today's rules, an inaccuracy HMRC finds that was left uncorrected is treated as "careless": a penalty capped at 30% of the unpaid tax, with HMRC able to assess back six tax years. From April 2028, failing to correct a known mistake lets HMRC reclassify it as "deliberate", the same category used when someone knowingly submits false figures: a penalty of 70% to 100% of the unpaid tax, and a 20-year assessment window instead of six. The change sits inside HMRC's wider push to close the UK's £59 billion tax gap.
What changed
The mechanism is new. Alongside the Duty to Correct, HMRC will gain the power to issue Customer Correction Notices, sent whenever the department has reason to suspect a tax return is incorrect. Andy Wood, tax barrister at Tax Barrister UK, explains that failing to respond properly to one of these notices "could also create a presumption of carelessness", though a taxpayer would have the chance to challenge it. HMRC's own stated aim is to end the practice of taxpayers spotting an old error and choosing to let it lie rather than report it, part of closing a tax gap that stood at £59.2 billion in 2024/25. Fiona Fernie, partner at Blick Rothenberg, has questioned whether that aim justifies the method: "Since the conduct of concealing income from the outset and failing to correct an honest mistake are plainly not in the same category there is a question over the proportionality of the proposed measure given that the legislation risks producing similar outcomes for both."
Worked example: a sole trader who spots an old mistake
Take an illustrative case: a self-employed plumber turning over £65,000 a year discovers that a return filed for 2022/23 left out £4,000 of cash jobs, a genuine recording slip rather than anything deliberate. At a combined income tax and Class 4 National Insurance rate of 29%, that means roughly £1,160 of tax should have been paid and was not. Under today's rules, if HMRC discovers this independently before it is corrected, the inaccuracy is "careless": a penalty of up to 30% of £1,160, or £348, and HMRC can only look back six tax years to assess it. From April 2028, if the plumber or his accountant spots the same mistake but it is not formally corrected, and HMRC later catches it through a Customer Correction Notice or an enquiry, the inaccuracy can instead be branded "deliberate": a penalty of between 70% and 100% of £1,160, or £812 to £1,160, roughly two to three times higher on the identical underpaid tax. The 20-year lookback also matters here: if the same habit of under-recording cash jobs ran through several years rather than just one, every one of those years becomes assessable rather than only the most recent six.
Worked example: a company's misclassified expense
Now take a ten-person company turning over £800,000, where a £15,000 van bought in 2021/22 was booked as a revenue expense instead of claimed through capital allowances. That misclassification understated taxable profit by £15,000 and, at the 19% small companies corporation tax rate that applied that year, left £2,850 of corporation tax unpaid. A new finance director reviewing the accounts in 2026 spots the error. Today, if it stays unreported and HMRC finds it independently, the careless penalty tops out at 30% of £2,850, or £855, inside the current six-year window. From April 2028, the same error left uncorrected can be reclassified deliberate: a penalty of 70% to 100% of £2,850, or £1,995 to £2,850, and a 20-year lookback rather than six, which matters far more for the scale of exposure than the penalty itself if similar misclassifications sit in older accounts that would otherwise be out of reach.
Why tax advisers are worried
Two specific gaps have drawn the sharpest criticism. First, there is no confirmed minimum threshold. Wood has warned that "without one, taxpayers could potentially face formal correction notices over relatively small amounts of unpaid tax", adding that "there is a risk that taxpayers could end up spending more on professional advice and administration than the tax originally at stake." Second, the extended 20-year window clashes with the statutory record-keeping duty that already applies to the self-employed, who are only legally required to keep records for five to six years. A taxpayer facing a 20-year review may simply no longer hold the receipts or bank statements needed to prove what happened, regardless of whether the original error was innocent. Fernie has called for "clearer safeguards and a finite time limit for making corrections", warning that "a measure intended to modernise compliance could undermine it" without them. HMRC's own response, given to City A.M., draws the line differently: "We know most of our customers act in good faith and want to get their tax right. These changes make it quicker and easier for taxpayers to correct errors when we flag them. They won't be penalised for innocent mistakes, and deliberate penalty charges only arise where taxpayers fail to take reasonable steps to correct an inaccuracy they were already aware of."
What it means for a UK business owner in practice
If your returns are accurate and you act on anything HMRC flags, this changes nothing. The regime is built around inaction after awareness, not around the mistake itself. The risk sits with the business owner who has, at some point, been told by an accountant, a bookkeeper or their own instinct that something on an old return looks wrong, and has not got round to fixing it. Before April 2028, that sits in the lower-penalty careless category if HMRC catches it first. After April 2028, the same known-but-unfixed error is exactly what tips it into the deliberate category, with the higher penalty and the much longer lookback attached. Sole traders carry an extra exposure here, given the mismatch between a 5-6 year record-keeping duty and a 20-year assessment window.
What to do this week
First, if an accountant, a bookkeeper or you yourself have ever flagged a possible inaccuracy on an old return that has not been formally corrected, get it corrected now, while it still sits in the careless category rather than waiting for April 2028 to arrive. Second, check how far back your own records actually reach; if it is the statutory five to six years and no further, that gap itself becomes a bigger liability once a 20-year lookback applies. Third, build a habit of reviewing prior-year returns whenever your bookkeeping changes hands, rather than assuming an old filing is settled simply because time has passed. Our tax planning service reviews where a filing position actually stands rather than waiting for a letter to raise it, and our Self Assessment service checks prior returns as standard when we take on a new client.
What is still uncertain
The April 2028 start date, the penalty bands and the 20-year lookback are all confirmed in the Finance Bill detail reported by City A.M. What is not yet settled is whether a minimum threshold will be added before the regime takes effect, which tax bodies are actively pushing for, and exactly how HMRC will judge what counts as "reasonable steps" to correct a known inaccuracy. The Finance Bill still has to complete its passage through Parliament, so expect further debate and possible amendment on both points before April 2028.
