Tackling the tax gap in 2026 – What is HMRC cracking down on?
By Heather Bright, Partner
While the black hole in the public finances currently occupies the same level of corporeality as Big Foot, in that few can agree whether it exists or not.
The fallout from the Autumn Budget has raised a few eyebrows and caused a wave of scepticism from commentators.
What does exist is the tax gap, the gap between the amount of tax owed and the amount collected, that remains a consistent problem for HMRC despite many attempts to tackle it.
The dawn of a new year sees HMRC once again do battle with the tax gap and it is worth understanding how that might impact you.
How is HMRC tackling the tax gap?
The most effective way to tackle the tax gap is to tighten compliance measures and increase penalties.
This is done with the aim of reducing accidental misfiling, as carelessness carries an increasingly costly price.
It is no secret that SMEs are the biggest contributors to the tax gap, as in the 2023/24 fiscal year, they failed to pay 40 per cent of the corporation tax they owed.
This meant that of the £36.7 billion that was owed, only £22 billion was collected.
As such, many of the new penalties that are set to be introduced in 2026 will centre on punishing small businesses in particular.
What are the new penalties HMRC introducing in 2026?
The most notable change is the increase in penalties for Corporation Tax (CT), which is the first time there has been a notable change in 25 years.
From 1 April 2026, missing a filing will attract a £200 penalty, which is double the current £100 penalty.
If that does not incentivise you to make your filing, and you keep missing the deadline, the penalty increases to £400 after three months.
There is a top penalty of £2,000 for repeat offenders, which is given when three successive filings are late.
As these are not significant amounts of money, it seems like they are more cautionary measures designed to inconvenience small businesses.
Larger businesses would likely be able to absorb the penalties, but they could cause problems for smaller businesses struggling to manage operational costs.
There are also penalties designed to enforce compliance with Making Tax Digital (MTD).
This is designed to ensure that landlords, sole traders and self-employed individuals who earn more than £50,000 a year keep up with their new filing obligations.
While there is no direct penalty for missing one deadline, each missed deadline awards you a penalty point and four points means a £200 fine.
The points stay on record for two years, after which they get wiped and you are given a fresh start.
As with the CT fines, these are not designed to be cripplingly punitive but severe enough that you take notice and work to avoid them in the future.
HMRC is set to adopt more digital systems and stringent checks to enhance compliance, so it is vital that you understand your obligations.
We can help you manage your responsibilities so that you don’t find yourself missing important tax deadlines.
Make 2026 the year of tax compliance by speaking to our team today!