Tax penalties cancelled by HMRC

During the year 2025 to 2026 HMRC overturned a record 48,189 tax penalties. The number of tax penalties cancelled had increased by about 4% compared to the the previous year.

The analysis shows that around 65% of the penalties that taxpayers appealed were cancelled.

The figures have raised concerns about HMRC’s use of automated systems to issue penalties for missed Self Assessment, VAT and tax-payment deadlines. It is noted that for taxpayers within the scope of Making Tax Digital (MTD), automatic fines have been replaced with a new penalty-points system. Instead of an immediate £100 fine for a missed quarterly return, taxpayers will receive a penalty point. If deadlines are missed four times in two years, a £200 fine is issued.

With the increasing drive to MTD the situation will be reviewed in future years.

The HMRC data shows that the overall number of penalties issued has fallen from around 9.1 million in 2024/25 to 8.1 million in 2025/26.

Penalty cancellation requests

There are many reasons why a tax penalty can be cancelled. Requesting a review of a tax penalty can examine if the penalty has been properly issued or, for example, explore the possibility of there being a reasonable excuse.

Some related links

Link to an example of one case relating to a VAT penalty review were we achieved success for our client. A further example relating to an HMRC VAT penalty were the tax payer was ultimately successful.

Press report

The Daily Telegraph reported on this topic in August 2026.

Contact

We can help appeal a late filing penalty. Speak to one our Tax consultants at Solve VAT in relation to tax penalties cancelled on 0161 883 2120.