HMRC is set to gain sweeping new powers to pursue unpaid tax, including the right to demand information about dead taxpayers without any time limit, to request people’s conversations with AI chatbots, and to treat honest mistakes on old returns as deliberate evasion. The measures were quietly added to the Finance Bill after Chancellor John Healey’s maiden Autumn Budget on 28 October, and the resolutions survived their first reading in the Commons on 3 November.
The shake-up is part of the government’s drive to close Britain’s tax gap — the difference between tax owed and tax collected — which HMRC estimates cost the Treasury nearly £60 billion in lost receipts in 2024/25. With Labour’s manifesto ruling out rises to income tax, VAT and employee national insurance, ministers are leaning on compliance and enforcement to raise revenue.
From April 2028, a statutory “duty to correct” will require taxpayers to fix mistakes on old returns as soon as they become aware of them. An inaccuracy — even an unintentional one — would be classed as “deliberate”, HMRC’s highest penalty tier, carrying a fine of up to 100 per cent of the unpaid tax and a scrutiny window of 20 years. Today, a mistake found after filing is usually treated as “careless”, with penalties of up to 30 per cent over six years. Tax barristers warn the regime has no minimum threshold and that its 20-year reach clashes with the five-to-six-year record-keeping rules for the self-employed. HMRC says innocent mistakes will not be penalised.
Families of the dead face longer exposure too. HMRC can currently demand information about a deceased taxpayer for up to four years after death; under the proposals, that limit would disappear, and the authority could gather evidence for existing investigations reaching back 20 years. Draft legislation requires HMRC to seek a tax tribunal’s approval before demanding information more than four years after a death, but it would not have to tell the executors or the family until after the tribunal has ruled. The government says the change merely updates existing powers for the digital age, in line with OECD standards.
The bill would also widen HMRC’s access to digital records so it can request taxpayers’ AI chatbot conversations, and require third parties — including software providers — to hand over tax information they hold. Advisers warn the change risks dragging innocent people into investigations over hypothetical arrangements explored with a chatbot. HMRC says it can only request information where it already has a lawful basis to do so.
Other changes include a reported reversal on electronic signatures — HMRC appears to have stopped accepting them on the forms used to authorise a tax agent, despite allowing them since 2021 — and a plan to deduct 45 per cent income tax at source from whistleblower rewards from March 2027. The Budget also gave HMRC a new power, from July 2029, to recover lower-value tax debts of up to £5,000 from individuals and £10,000 from companies through instalments taken directly from bank accounts.
The detail in this report rests on City AM’s reading of the draft Finance Bill, published on 15 November, and includes HMRC’s and the government’s responses. The bill has passed only its first reading, so the measures could still change before they become law.
Sources: City AM, “The HMRC stealth powers to take your taxes” (https://www.kieranbrookholmes.co.uk/articles/the-hmrc-stealth-powers-to-take-your-taxes-f5d4acb8); Contractor UK, “Autumn Budget 2026 contractors: IR35 untouched, BADR halved” (https://www.contractoruk.com/news/autumn-budget-2026-contractors-ir35-badr-hmrc).
