Failure to Notify penalties for capital gains tax (CGT) have doubled over the past two years, according to data obtained by Financial Software Ltd (FSL) via a Freedom of Information request.
The rise follows cuts to the annual exempt amount (AEA), which fell from £12,300 to £3,000 over two tax years, first to £6,000 in 2023/24 and then to £3,000 in 2024/25.
HMRC issued 175 penalties in 2020/21 and 2021/22, rising to 254 in 2023/24 and 350 so far in 2024/25.
Failure to Notify penalties apply when taxpayers miss HMRC deadlines, including:
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Selling an asset and needing to pay CGT
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Changes in circumstances affecting tax liability
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Corporation Tax or VAT registration obligations
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Starting a business that must register with HMRC
Penalties are based on potential lost revenue, although HMRC may reduce fines for prompt disclosure.
Michael Edwards, FSL managing director, said: “People are seeing bigger fines and interest penalties as HMRC looks to boost the UK’s coffers following new impetus from the Chancellor, Rachel Reeves. With CGT Failure to Notify penalties doubling, clients will need advisers more than ever to stay on top of their tax positions.”
FSL tax reporting analyst Alex Ranahan added: “It is astonishing that only 350 taxpayers failed to notify HMRC of CGT liability last year. With the AEA now just £3,000, more people will fall within scope for CGT. Taxpayers should be aware of their responsibilities and HMRC must do more to raise awareness to avoid costly penalties.”
