HM Revenue and Customs (HMRC) is preparing to launch a significantly more aggressive enforcement campaign targeting historic tax rule-breaking, with a suite of new powers and initiatives set to take effect from 2026.
New Powers and a US-Style Whistleblower Scheme
The crackdown, forming part of Chancellor Rachel Reeves's reforms to tackle tax avoidance, will see HMRC establish a dedicated small business evasion and enforcement team. The tax authority is also investing in powerful new tools to gather information and target high-value non-compliance.
A key new measure is a reward scheme for informants, modelled on the successful US system. For cases where the tax recovered exceeds £1.5 million, HMRC will pay rewards of up to 30% of the additional tax collected. This scheme, which applies immediately, is designed to incentivise whistleblowers to report serious fraud and evasion by large corporates and wealthy individuals.
Sharp Rise in Investigations and Tougher Penalties
The government's direction is clear: tougher action, broader powers, and sharper scrutiny. Criminal investigations are projected to rise substantially, with charging decisions for the most serious fraud cases expected to increase by 20% – from 500 to 600 annually – by the 2029-2030 period.
Penalties for late tax filings and payments are also being ramped up. Corporation Tax late filing penalties will be doubled from 1 April 2026, while increased penalties for late payment of Income Tax Self Assessment (ITSA) and VAT will apply from 1 April 2027.
Furthermore, the framework for publishing the details of deliberate tax defaulters will be strengthened. A consultation is due in early 2026 on introducing a new 'recklessness' criminal offence for direct tax, aligning it with existing indirect tax offences.
Expert Warning on "Overly Aggressive" Enforcement
While the government aims to boost revenue, tax experts have issued a note of caution. Barbara Bento, a partner at the accountancy firm Buzzacott, warned that "overly aggressive enforcement" against those experiencing genuine financial difficulties "risks undermining long-term revenue for the Exchequer."
Bento stated, "The loan charge review offers some overdue relief, but the broader measures make HMRC’s direction unmistakable. This is the moment to revisit and regularise any historic tax non-compliance." The warning underscores the need for businesses and individuals to ensure their affairs are in order ahead of the intensified scrutiny.
The combined effect of new funding, enhanced powers, financial incentives for informants, and stiffer penalties signals the most significant hardening of HMRC's approach in years, with 2026 marked as the starting point for this new era of tax enforcement.
