Penalties for careless mistakes in tax returns?

Recently, some departments have calculated the 2021/22 year HMRC fines for taxpayers in tax returns.

The 80% penalty for “careless mistakes” by taxpayers has nearly tripled by 40,000 from the previous year.


How to Assess Careless Mistakes


When HMRC assesses carelessness, it is often considered:

  • How wrong is the taxpayer’s liability for the year
  • Taxpayer’s ability – HMRC will make the finance director’s account higher than the shop owner
  • Supporting Evidence – Whether the client has a health problem or other reasons for making a mistake.

“Careless Mistakes”

Careless mistakes were originally judged as inadvertent moves, but the pandemic has made it difficult for many businesses and individuals to get back to the office to access accounting data.

As a result, some people may have omitted or incorrectly filled in some data when submitting their reports, which led to a more relaxed approach by HMRC.

Penalties are suspended for the 2021/22 period once HMRC believes the taxpayer can correct the error through amendments.

During the suspension of penalties, taxpayers must comply with the conditions set out and are asked to take care to avoid further penalties.

Penalty Rating

How HMRC decides the proportion of punishment depends on the motivation for the behaviour.

Read our previous article to find out how HMRC determines penalties and fines.

Careless Mistakes May Result in Harsher Fines

Penalized businesses and individuals should be more cautious in the future. If HMRC finds that subsequent tax returns contain errors, they will levy both the suspended penalties and new penalties.

Repeated mistakes can be suspected by HMRC as intentional mistakes. Taxpayers will face higher fines if HMRC initiates a review and taxpayers fail to prove that the mistakes were inadvertent.

At this time, contacting a professional accountant team and cooperating with the team to actively identify mistakes. It is usually regarded as an attitude of admitting mistakes, and may be able to exempt some punishments.


Keep Account Evidence


It’s a good idea to keep detailed financial records, such as invoices, receipts, and utility bills for any inventory and supplies or other expenses.

Keeping basic financial records will help you when filling out your tax return, and it can also be used directly as evidence during an audit.

Also, to avoid mistakes, you can also open a dedicated business bank account, which is a great way to separate personal and business.