HMRC Tax Enquiries Jump by Over 20%

If you are self-employed or have a side hustle, it’s important to prioritize your tax compliance. Recent data released by HMRC (Her Majesty’s Revenue and Customs) shows that tax enquiries have surged by more than 20% in just two years. In the 2022/23 financial year, HMRC opened a total of 299,000 tax enquiries, a significant increase compared to the 247,000 enquiries in 2020/21. This rise in compliance activity has resulted in HMRC collecting £814 billion in tax revenue, an 11.3% increase from the previous year.

An Increase in Compliance Activity

According to HMRC’s quarterly performance updates, the number of tax enquiries, also known as “civil compliance checks,” has steadily risen. In 2021/22, there were 265,000 enquiries, showing a 21.05% increase over the course of these three years. This upward trend has continued into the 2023/24 financial year, with HMRC already opening 77,000 enquiries in the first quarter (April to June 2023). If this pace continues, HMRC is on track to surpass 300,000 enquiries this year, marking the third consecutive year of increased compliance activity.

Impact on Self-Employed Workers

With 4.3 million self-employed workers in the UK, it is crucial for this group to be aware of HMRC’s heightened compliance efforts. Qdos, a tax insurance provider, has emphasized the importance of filing tax returns and paying bills on time for all self-employed individuals, whether they are full-time freelancers or part-time side hustlers. Qdos CEO, Seb Maley, cautions that HMRC can investigate anyone at any time, and it’s not uncommon for innocent individuals to be subject to a tax enquiry. Without representation and protection, dealing with a tax enquiry can be a stressful and expensive process.

Taking Action

Given the increase in tax enquiries and HMRC’s focus on boosting tax receipts, self-employed workers and those with side hustles should take steps to ensure their tax compliance. Here are some actions to consider:

  1. File Tax Returns and Pay Bills on Time: Ensure you file your tax returns accurately and meet all payment deadlines. This is the bare minimum to avoid potential penalties and interest charges.
  2. Seek Professional Advice: Consider consulting with a tax professional or accountant who specializes in working with self-employed individuals. They can provide expert guidance on tax planning strategies and help you navigate the complexities of the tax system.
  3. Maintain Detailed Records: Keep thorough records of your income, expenses, invoices, and receipts. This documentation will support your tax filings and provide evidence in case of a tax enquiry.
  4. Consider Tax Insurance: Tax insurance can provide protection and cover the costs associated with professional representation during a tax investigation. It can help alleviate the financial burden and stress that comes with a tax enquiry.

By following these steps, you can minimize the risk of a tax enquiry and ensure that you are prepared in case HMRC decides to investigate your affairs.

In conclusion, the number of tax enquiries conducted by HMRC has increased significantly in recent years. This rise in compliance activity has resulted in higher tax revenues for the government. To avoid potential penalties and stress, it’s essential for self-employed individuals and those with side hustles to prioritize their tax compliance, file returns on time, and seek professional advice when needed. Taking proactive measures and staying informed are key to navigating the tax landscape successfully.