Tax period

The tax year begins on April 6 and ends on April 5 of the following year in the United Kingdom.

Tax returns

The tax system is self-evaluating. Most pay taxes via withholding at source and don't file returns, but a third must do so every year. Spouses and domestic partners are taxed separately.

The deadline for filing and paying taxes is January 31 after the fiscal close (April 6 — April 5). For paper statements, the early delivery deadline is October 31 (payment is still January 31).

For the sale of residential property in the United Kingdom, residents or non-residents must notify HMRC within 60 days of the sale. Penalties if not complied with, even without taxes due.

Digital Taxes for Income Tax

As of April 6, 2026, taxpayers with income for certain items greater than 50,000 GBP must digitally register and submit quarterly updates. For income between 30,000 and 50,000 GBP the obligation begins in 2027, and for income greater than 20,000 GBP in 2028.

New sanctions

Point system for late submission (2 points for annual sanction, 4 points for quarterly sanction).

Penalty of GBP 200 upon reaching the threshold.

Points expire after 24 months.

Penalties for late payment:

• There is no penalty if paid within 15 days of the due date.
• If you pay between 16 and 30 days, a 3% penalty.
• After 30 days, additional fine of 3% and daily surcharge of 10% per year until paid.

Tax Audit Process

HMRC can investigate an individual's income tax return and any claims or options included in it.

You must notify your intention to investigate within 12 months of filing the declaration, provided that it has been submitted within the legal deadline.

Deadlines for notification: If the declaration is submitted late, HMRC must initiate the investigation no later than the third business day after the first anniversary of the filing date. The business days considered for these deadlines are: January 31, April 30, July 31 and October 31.

Tax recovery: If HMRC determines that there are unpaid taxes, it will attempt to recover them. The deadlines for claiming taxes are extended if the loss is due to deliberate or negligent conduct by the taxpayer or their agent.

Deadlines for tax evaluation

The general deadline is 4 years from the end of the fiscal year to carry out a standard evaluation.

Negligence is 6 years if the tax loss is due to taxpayer negligence.

For Offshore Affairs, the deadline is 12 years if the loss relates to income or assets abroad or offshore transfers.

Due to deliberate conduct or non-notification, the deadline is 20 years if the loss is due to deliberate action or to the lack of notification of tax obligations.

Topics of interest to HMRC

After the Fall 2024 Budget, increased scrutiny from HMRC is expected in the following areas:

Residency and offshore aspects

HMRC is intensifying the review of individuals' tax residency.

It will focus especially on assets and structures abroad.

Suspicious characteristics in tax planning

HMRC identifies certain elements as warning signs that could trigger an investigation. Among them, the following stand out:

• Artificial or forced structures.
• Excessive complexity without commercial justification.
• Guaranteed returns with no apparent risks.
• Confidentiality or secret agreements.
• Deferred income or anticipation of deductions.
• Use of offshore trusts or companies for no clear economic reason.
• Involvement of tax havens for no valid reason.
• Improper participation of tax-exempt entities, such as pension funds.
• Money that returns to the starting point (closed circuit).
• Funding provided by the same plan sponsor.

Specific schemes

HMRC also has a list of specific schemes that it considers aggressive and that are likely to be challenged.

Anti-Avoidance Rules

The UK tax system includes multiple specific and general measures to combat tax avoidance. Among the main ones are:

Specific rules

These apply to specific schemes and common circumvention practices, such as:

• Disguised compensation: structures designed to pay employees who are not properly taxed.
• Personal services companies (IR35): aimed at contractors who operate through companies to avoid labor contributions.
• “Enveloped dwellings”: Measures against the use of corporations to own high-value residential real estate and avoid certain taxes.

General Anti-Avoidance Standard

It allows HMRC to challenge abusive tax schemes, even if they formally comply with the law. It focuses on artificial tax abuse, not legitimate planning.

Disclosure of Tax Avoidance Schemes

It was created so that HMRC can act in advance in the face of tax avoidance attempts. It introduces the concept of “reportable mechanisms”, a broad definition that encompasses any scheme, transaction or set of transactions.

Both the developers and the users of these schemes, which in general terms have typical characteristics of tax avoidance and offer a tax advantage, are required to notify HMRC of the use of the scheme from the moment it is first marketed.

Expedited tax payment

Current legislation allows HMRC to require the accelerated payment of taxes from those who have used schemes disclosed under the Disclosure of Tax Avoidance Schemes rules or are involved in tax planning that is considered contrary to the General Anti-Avoidance Rule. This means that HMRC can withhold the amount of the disputed tax while the dispute is being resolved. In addition, the regulations may require taxpayers who have followed failed agreements in third-party litigation to pay the corresponding amount when required.

Anti-tax avoidance legislation abroad

The United Kingdom has specific rules designed to prevent tax avoidance through structures abroad. These rules seek, in general terms, to attribute income generated by foreign entities (such as non-British companies or trusts) to individuals resident in the United Kingdom who have transferred funds to those entities and who, in addition, have the capacity to benefit from that income. This can happen, for example, if a person owns shares in the foreign entity or if they receive some type of economic benefit from it.

These provisions, known as rules on the transfer of assets abroad, apply only to tax residents of the United Kingdom. Currently, they are being reviewed in a consultation process, and possible changes to these regulations would take effect as of April 6, 2026.

Correction obligation and incapacity to correct

As of September 30, 2018, taxpayers, including trustees and landlords who are not resident in the United Kingdom, who have not corrected errors related to income tax, capital gains tax, or real estate tax, face a strict sanctioning regime, provided that those errors occurred before April 6, 2017.

Penalties include fines of between 100% and 200% of the tax due. This penalty applies regardless of the reason for the error, unless the taxpayer can demonstrate that they had a reasonable justification. If the amount of tax exceeds 25,000 GBP in a single financial year, an additional sanction based on equity, of up to 10% of the value of the related asset, may be imposed. In addition, if it is considered that there was an intention to evade the correction obligation by transferring funds or assets, HMRC may apply an additional penalty of 50% on the initial sanction.

There may also be reputational consequences, as HMRC reserves the right to make the taxpayer's identity public if the tax involved exceeds 25,000 GBP as a result of an investigation.

These rules apply to any error related to financial interests located outside the United Kingdom, or to transfers of assets abroad, and are not limited solely to cases of deliberate or negligent conduct. As of April 6, 2017, although the Correction Obligation and Inability to Correct regime is no longer applicable, HMRC has other expanded mechanisms to investigate and sanction tax errors.

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