Something for you to share with your accountancy connections to send to their clients (and ask them to name check you!)

One would not normally encourage anyone to pick a fight with HMRC. Life is generally easier if you avoid it. But when it comes to automated tax penalties, the data suggests that quietly paying up may be the wrong default.

According to UHY Hacker Young, taxpayers should contest automated penalties issued by HMRC unless they are confident they are in the wrong. Otherwise, they could be handing over millions of pounds unnecessarily.

HMRC’s own performance data for the first six months of the 2025–26 tax year shows the tax authority won fewer than 38 per cent of appeals lodged against automated penalties for late filing and late payment.

In that period alone, taxpayers successfully overturned more than 20,000 penalties.

UHY Hacker Young argues that this success rate makes a strong case for appealing automated fines as a matter of course.

“If you do not appeal, you are effectively giving extra money to the taxman,” the firm says, in more polite language.

HMRC automatically issues a £100 fine when a self-assessment return is filed late, with additional penalties applied the longer the delay continues.

Late payment penalties start at 5 per cent of the unpaid tax after 30 days, with further charges at six and twelve months. Interest is also added for good measure.

Similar automated penalties apply to VAT returns and company tax returns that are filed or paid late.

The problem is that HMRC’s systems can trigger penalties even when taxpayers have valid reasons for missing deadlines.

Data released last summer by Tax Policy Associates, obtained via a Freedom of Information request, showed that over the past five years around 600,000 people were hit with late filing penalties despite owing no tax at all.

That does not suggest a finely tuned system!

“When you appeal, you have the opportunity to provide evidence and argue your case,” says Neela Chauhan, partner at UHY Hacker Young. “Given HMRC’s success rate, you are more likely than not to win an appeal and overturn an automatic penalty.”

HMRC will waive an automated fine if the taxpayer has what it considers a “reasonable excuse”. These include technical failures while preparing an online return, problems with the HMRC website, postal delays, serious illness, bereavement, or an adviser failing to submit the return on time.

In other words, real life.

For advisers and accountants, there is a simple takeaway here.

• Do not treat automated penalties as final. They are often just the starting point.

• Encourage clients to appeal where appropriate. Especially if there is a genuine reason for delay.

• Keep evidence. Screenshots, correspondence and timelines matter.

• Educate clients early. Many people assume HMRC decisions are not worth challenging. The data suggests otherwise.

• Build appeals into your process. It can save clients money and reinforce the value of good advice.

HMRC may not enjoy being challenged. But if the numbers are anything to go by, appealing automated penalties is less a rebellion and more a sensible use of the system.

If in doubt, fight it out.

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