What happens if I'm reported to HMRC?
Anyone can report you to HMRC anonymously - an ex-partner, a neighbor, or a disgruntled employee. However, HMRC doesn't just act on rumours. They use a powerful AI system called Connect to cross-reference your bank interest, property ownership, and digital platform sales (Airbnb, Vinted, eBay) to see if the report matches the data.
The Golden Rule: If you know you have made a mistake, tell them immediately ('Unprompted Disclosure'). If you wait for them to contact you, the penalties are much higher.
1 The Typical Timeline
If you take no action, this is the standard statutory process. Timescales are approximate but typical for 2026.
Risk Assessment
HMRC receives the report. They do not contact you yet. They run your name through 'Connect' to look for anomalies (e.g. undeclared rental income or expensive assets).
The 'Nudge' Letter
If they find a mismatch, they send a 'One to Many' nudge letter. It says 'We have information about your income'. DO NOT IGNORE THIS.
Compliance Check
If you ignore the letter, they open a formal Compliance Check (Code of Practice 8 or 9). They will demand bank statements and meeting minutes.
Assessment & Penalty
They calculate the tax owed + interest + a penalty. Penalties range from 0% (Careless & Unprompted) to 100% (Deliberate & Concealed).
2 Free Calculators & Checks
Worried about a report? Take this risk assessment to see if HMRC is likely to investigate you.
HMRC Investigation Risk Scanner
What triggered your concern?
See the difference in fines between owning up now versus waiting for them to catch you.
Disclosure Penalty Estimator
Unprompted Disclosure
You tell them FIRST
Prompted Disclosure
They find you FIRST
The Real Cost: If they act first (Prompted), you lose control. If you act first (Unprompted), you can often negotiate the penalty down to 0% for "Careless" errors. Interest is charged on top of all amounts.
Received a 'One to Many' letter? Generate a safe, professional response to buy yourself time.
Nudge Letter Response Builder
*Never ignore a letter. HMRC systems track response times. An acknowledgement stops them escalating immediately to a formal enquiry.*
Think you are under the radar? Check our database of exactly what data sources HMRC has access to.
What Can HMRC See?
All interest over very small thresholds is reported automatically.
Common Reporting Standard (CRS) shares data from 100+ countries.
Platforms now legally obligated to report income data.
Sales data reported if >30 sales or >£1,700/year.
Ownership changes cross-referenced with declared capital gains.
HMRC sends data notices to Coinbase, Binance etc for UK users.
The supercomputer linking all the above together.
Used to check lifestyle capability (expensive cars vs low income).
Investigators manually check public profiles for lifestyle mismatch.
HMRC 'Connect': What can they see?
HMRC's supercomputer pulls data from:
- Banks: All interest over thresholds.
- Land Registry: Properties bought/sold.
- Platforms: Airbnb, Vinted, eBay, Uber, Deliveroo.
- Crypto Exchanges: Coinbase, Binance (bulk data requests).
If you are trading on these platforms and not declaring it, they will find out eventually.
Prompted vs Unprompted: The Cost
The difference is massive.
- Unprompted (You tell them): Penalty is 0% - 30%.
- Prompted (They catch you): Penalty is 35% - 100%.
For a £10,000 tax bill, acting first saves you up to £7,000 in fines.
Summary of Options
Make an Unprompted Disclosure
If you tell HMRC about the error before they open an enquiry, you get full credit for disclosure. This can reduce penalties to 0%.
Respond to the Nudge Letter
Use our 'Response Builder' tool below. Acknowledge the letter, review your records, and reply within 30 days.
Do Nothing
HMRC will eventually raise an 'Estimated Assessment' for what they *think* you owe. This is usually much higher than reality, and legally enforceable.
Common Questions
Can I find out who reported me?
No. HMRC guarantees anonymity to whistleblowers. They will never reveal the source of the intelligence, even if you make a Freedom of Information request.
Will I go to prison?
Extremely unlikely for standard evasion. Prison is reserved for serious fraud, organised crime, or claiming fake VAT repayments. For undeclared rental income or side hustles, they just want the money + penalties.
What if the report is malicious lies?
HMRC receives thousands of malicious reports (e.g. during divorces). If the 'Connect' system shows your tax affairs are normal (e.g. your lifestyle matches your declared income), they will usually close the case without ever contacting you.
How far back can they look?
Usually 4 years for genuine mistakes. 6 years for 'careless' behaviour. 20 years for 'deliberate' evasion. If you have been hiding income for decades, they can go back 20 years.
Official Sources & References
Related Situations
Other guides accurately explaining what happens next in tax & hmrc .
What happens if HMRC freezes my bank account?
HMRC has two ways to stop your cash: Civil debt collection (DRD) or Criminal investigation (AFO). Know which one you are facing and how to protect your living costs.
What happens if I don't respond to a letter from HMRC?
Ignoring HMRC is dangerous. They can 'determine' (guess) your tax bill and charge daily penalties for silence.
What happens if I don't file a Tax Return?
HMRC penalties are severe and automatic. A simple £100 fine can escalate to over £1,600 within 6 months due to daily penalties. Ignoring HMRC is the most expensive mistake you can make.