A New Crackdown on Tax Evasion and Avoidance: What It Means for You

The UK government is ramping up efforts to combat tax evasion and avoidance, with new measures expected to generate an additional £1bn for the Treasury over the next four years. Announced in the Spring Statement, these initiatives build upon the compliance measures introduced in last year’s Autumn Budget.

Stricter Penalties for Late Payments

One key change is an increase in late payment penalties for taxpayers under the government’s Making Tax Digital (MTD) programme. From April ‘25, VAT taxpayers will face higher penalties, with self-employed individuals and landlords earning over £50,000 annually joining the programme in April 2026. The revised penalty structure is as follows:

• 3% of the outstanding tax if overdue by 15 days.
• An additional 3% if overdue by 30 days.
• A 10% annual penalty for amounts overdue beyond 31 days.

These changes highlight the importance of timely tax payments, a concern raised by the Institute of Chartered Accountants in England and Wales, which described the increase as “very significant.”

Expanding Tax Compliance Efforts

To support enforcement, the government plans to recruit 1,100 additional compliance staff, adding to the 5,000 new officers announced last autumn. It will also allocate more tax debts to private debt collection agencies.

Collectively, these measures aim to boost tax revenues by £7.5bn annually by 2029-30, with an estimated £2.2bn in additional tax revenue resulting from Wednesday’s announcements.

Tougher Measures Against Avoidance and Evasion

The government is also consulting on further penalties for those who provide incorrect tax information. Proposed changes include:

• Higher penalties for intentional tax under-reporting.
• New sanctions targeting promoters of tax avoidance schemes, including legal professionals and tax advisers.
• Enhanced data-sharing between HMRC and external bodies to improve tax compliance.

Recent scandals involving tax advisers promoting non-compliant schemes, such as fraudulent R&D tax claims and NHS worker tax avoidance strategies, have underscored the need for stronger deterrents. The government is now seeking feedback on measures such as harsher penalties, public disclosure of sanctioned advisers, and closer collaboration between HMRC and professional bodies.

Upcoming Compliance Changes

The Spring Statement confirmed that by April 2028, self-employed individuals and landlords earning at least £20,000 will be required to comply with the MTD programme. Additionally, the government is exploring an advance clearance system for R&D tax claims to reduce errors and fraud.

What This Means for You

For business owners, landlords, and self-employed individuals, these changes reinforce the need for robust tax compliance. Ensuring accurate tax reporting and timely payments will be more critical than ever to avoid penalties. If you have concerns about how these measures may affect you, seeking professional financial advice is essential.

At Lexington Wealth, we help our clients navigate complex tax regulations and ensure their financial plans remain on track. If you need guidance on tax compliance or planning strategies, get in touch with our team today.