We hope that you have succeeded so far in sticking with your New Year’s resolutions and that being more efficient with tax filings is on the list.
HMRC certainly seems to have it in mind, as it is hoping to do more to tackle the tax gap in 2026.
To stay up to date, you should know what penalties are rising this year and how to stay compliant.
Will the tax gap be tackled in 2026?
The tax gap is the difference between the amount of tax owed and the amount of tax that is collected.
Any missed filings and instances of tax avoidance or evasion contribute to this, with the end result being less money in the public purse.
While the tax gap is contributed to by many throughout society, the SMEs have a particularly bad reputation, as 40 per cent of SMEs failed to pay the corporation tax they owed in the 2023/2024 fiscal year.
Although SMEs should have paid £36.7 billion in tax during that time, only £22 billion was collected.
HMRC no longer want to leave £14 billion uncollected and is working to improve compliance among SMEs.
Will increased penalties improve tax compliance?
As operational costs rise, it is hoped that any increased penalties will serve to make business owners pay closer attention to their tax obligations.
For the first time in 25 years, the penalty for failing to pay Corporation Tax (CT) is set to increase.
From 1 April, missing a CT filing will incur a £200 penalty, double the current penalty of £100.
This amount will rise to £400 after three months if the tax filing remains uncompleted.
A top penalty of £2000 awaits repeat offenders who are late with three successive filings.
It is worth keeping in mind that not all missed or erroneous filings are the result of bad intentions.
Sometimes, deadlines can be overlooked, or mistakes can be made when compiling figures.
It is hoped that steeper penalties will inspire business owners to give tax filings the serious consideration they require to avoid mistakes and errors.
For sole traders, landlords, and self-employed individuals, greater compliance comes in the form of MTD for Income Tax beginning to be mandatory this year.
While this will see more penalties in effect, the penalties do not begin until April 2027.
2026 remains the year when those impacted by MTD should get familiar with the new obligations before the penalties take effect.
Even though the penalties do not take effect until next year, any impacted by MTD should work to file their taxes on time and accurately.
Whether you are looking to keep pace with individual tax obligations or those of a business, our team can help you.
We want to see greater tax compliance in 2026, so we will help you understand your obligations so that you do not make mistakes or miss deadlines this year.
For help in becoming confident in keeping pace with tax obligations, speak to our team today.