There’s no question that the tax landscape is increasingly complex. Tax-efficient strategies can quite easily stray into evasion territory if people aren’t properly supported.
Step by step, HMRC has been acting to stem the loss of tax receipts because people are not paying the correct tax due on their investment earnings, whether intentionally or accidentally.
With CGT receipts down for two years in a row, the tax authority is determined to reverse this shortfall, deploying a data-led strategy to identify where tax is owed but not paid. At the same time, it also wants to make it easier to make the correct tax payments and stay compliant.
Announced 10 years ago but only now coming into play in April 2026, ‘Making Tax Digital’ is the government’s and HMRC’s initiative to transform the tax system. The key objective is to make tax administration more efficient, effective, and simpler for taxpayers.
This will apply not only to individual taxpayers, but also to most businesses, the self-employed and landlords.
Investigations into the unwilling will be ramped up, with stringent penalties applied and published
With a boost to its data-gathering powers and its ability to amass, interpret and act upon data, HMRC has resolved to take a two-pronged approach, while functioning much more electronically across the board. It wants to help people stop making unintentional errors, settle their tax liabilities accurately and therefore avoid punitive fines.
At the same time, it will be going hard on promoters and users of schemes that have the main goal of avoiding tax – even those advised to do so.
The idea is that those willing to pay the right tax will find it easier to comply, because the scope for getting things wrong is reduced. On the other side of the coin, investigations into the unwilling will be ramped up, with stringent penalties applied and published.
There will be increasing penalties for people who get it wrong, especially if they are careless with their self-assessment calculations and declarations. Some will gulp when they learn that HMRC’s get-tough actions include publishing the names of people found to be “defrauding the state”.
Why fears of a ‘non-dom exodus’ are overblown
Following high-profile court cases won by the tax authority, there may not be many big fish still deliberately hiding gains in the thousands and millions of pounds, but here are some salutary facts. Last year, chancellor Rachel Reeves announced that an extra 5,000 compliance officers will be recruited to tackle tax evasion.
There was also confirmation in this year’s Spring Statement that HMRC intends to introduce a new whistleblower scheme aimed at businesses and wealthy individuals, where informants are paid a percentage of any tax recovered.
In certain areas, HMRC’s hunt has already begun. Investigations into unpaid CGT liabilities rose from 4,564 to 14,223 in the 2023–24 tax year, as the tax authority cracked down on a raft of amateur traders and crypto investors. Figures from accountancy group UHY Hacker Young indicate that a total of £202.4m in underpaid tax was recovered from the probes – up from £180.8m in the previous 12 months.
It looks like this will expand in latitude to capture more individuals who, one way or another, fall short of paying the right amount of tax owed.
With more people being pulled into CGT and tax rules remaining complex, professional advice is needed more than ever
For example, HMRC is looking to accelerate efforts to push online trading platforms to port tax-relevant data directly to the authority, shining a light on gainful trades by individuals that were previously invisible. Offshore investments are also under scrutiny – those arrangements bringing gains for UK taxpayers, even if the gains made are technically not brought onshore.
It’s evident that HMRC is applying changing regulations to go after more fruit, whether low-hanging or not. With more people being pulled into CGT and tax rules remaining complex, professional advice is needed more than ever.
Advisers have already noticed that growing numbers of clients are enquiring about tax-related matters. To the credit of the advice sector, all this points to the value provided by advisers and planners in working with clients to make sure they’re fully aware of their liabilities on property and other investments – so that where gains occur, clients are in the right frame of mind to make correct self-assessment declarations.
For advice firms, availing themselves of investment tax solutions from third-party experts can help them avoid putting a foot wrong as HMRC becomes increasingly proactive in following the data – and spotting more conduct that crosses the line into what we might now call ‘ruinous tax avoidance’.
Michael Edwards is managing director at FSL
