What happens if I don't declare income?
Think you can fly under the radar? Think again. HMRC receives automatic data from banks, lettings agencies, and platforms like Vinted and Airbnb. If you have income you haven't declared, the clock is ticking.
1 The Typical Timeline
If you take no action, this is the standard statutory process. Timescales are approximate but typical for 2026.
Income Received
You earn money (rent, side hustle, crypto) and fail to declare it on a tax return.
HMRC 'Connect' Flag
HMRC's AI matches your bank interest or platform data with your tax record. A discrepancy is flagged.
Nudge Letter / Enquiry
You receive a letter asking you to 'check your tax position'. This means they know. The opportunity for 'Unprompted Disclosure' is gone.
Assessment & Fine
You are billed for the Tax + Interest + A penalty of up to 100% of the tax due.
2 Free Calculators & Checks
Fines depend on whether you tell them first or they catch you. Calculate the difference.
Penalty Estimator
See the massive difference between telling HMRC yourself (Unprompted) vs them finding you (Prompted).
Selling on Vinted/eBay? Check if you have actually crossed the trading threshold.
🛍️ Side Hustle Tax Checker
Selling on Vinted, eBay, or Depop? Check if you owe tax.
What are you selling?
Landlord? Use the Let Property Campaign to settle. Estimate your bill here.
Landlord Amnesty Checker
The "Let Property Campaign" allows landlords to settle undeclared rent for a lower penalty. Estimate your offer.
Recommended Offer
The 'Behavior' Test
HMRC penalties are based on 'Behavior'. Careless (an honest mistake) means small fines. Deliberate (knowing you should pay but choosing not to) means big fines. Concealed (hiding evidence) means prison risk.
How HMRC 'Connect' Finds You (The Super Computer)
HMRC's "Connect" system is one of the most advanced data mining tools in the world. It cost £80m+ to build and cross-references over 22 billion lines of data to find discrepancies in your lifestyle vs your declared income.
It automatically pulls data from:
- Bank Accounts: Interest earned, large transfers, and overseas accounts (via the Common Reporting Standard).
- Digital Platforms: Vinted, eBay, Airbnb, and Etsy now legally *must* report your sales if you earn over £1,000/year.
- Land Registry: It knows every property you own. If you have a second home but declare zero rental income, it flags you immediately.
- DVLA: Expensive cars registered to people with low declared income trigger an investigation.
- Social Media: Yes, they scrape public profiles. Posting about 5 holidays a year while declaring £15k income? That's a flag.
The scary part? It happens without a human involved. The system generates a "Risk Score" for every taxpayer. If you score high enough, an enquiry letter is sent automatically.
Summary of Options
Digital Disclosure
If you tell HMRC *before* they contact you, it counts as 'Unprompted'. The penalty can be as low as 0%.
Wait for Letter
If you wait until they find you, it counts as 'Prompted'. The minimum penalty is usually 15-30% of the tax owed.
Cooperate Fully
If caught, giving full details and access helps reduce the 'Behavior' penalty score.
Common Questions
How do they find out?
HMRC's 'Connect' system pulls data from Land Registry, DVLA, Banks, and digital platforms (Airbnb/eBay/Vinted). If you have a bank account, they can see the interest and work out your savings.
I only sold personal items on eBay. Do I pay tax?
Generally no. Selling your own old clothes is tax-free. Buying items to sell for profit is trading and is taxable.
What is the Let Property Campaign?
A special amnesty for landlords. If you have undeclared rent, use this specific disclosure facility to get better terms.
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'm reported to HMRC?
Being reported for tax evasion is stressful. HMRC's 'Connect' system will analyse your data. If you have undeclared income, telling them BEFORE they investigate reduces penalties significantly.