Modernising Tax Error Corrections UK 2026/27 — Proposed Rules

HMRC has published draft legislation to modernise how taxpayers correct inaccuracies in returns and other documents. The proposed framework would introduce two connected duties:

1. a general obligation to take reasonable steps to correct an inaccuracy once the taxpayer becomes aware of it; and
2. a new HMRC Customer Correction Notice power requiring the taxpayer to correct a specified inaccuracy, make a disclosure or explain why no correction is needed.

The proposal is not yet an operative filing rule. HMRC's policy paper says it would take effect on an appointed day in the future. Until final legislation and commencement rules are published, taxpayers must continue to use the current amendment, disclosure, assessment and penalty processes.

This guide covers the proposed policy and its practical preparation implications. It is distinct from the existing HMRC correction notice guide, which explains what to do when a current notice has already been received.

What the proposed duty would require

The draft legislation would add a duty to take reasonable steps to secure correction of an inaccuracy in certain returns or documents provided to HMRC. If the taxpayer can correct the error directly, the proposal says they should do so. If they cannot correct it directly, they should inform HMRC.

The duty would apply when the taxpayer becomes aware of an inaccuracy and the error can still be corrected through an assessment or another lawful route. The proposal therefore does not require a taxpayer to reopen a period that is already outside the applicable statutory time limits.

The policy intent is to make the expectation of self-correction explicit. It does not mean that a taxpayer must accept HMRC's interpretation of an uncertain point of law without analysis, or that an honest estimate automatically becomes a deliberate inaccuracy.

What is a Customer Correction Notice?

The proposed notice would be a new HMRC power. Where HMRC has reason to suspect an inaccuracy in a covered return or document, HMRC could issue a notice identifying the inaccuracy or kind of inaccuracy and requiring the taxpayer to respond by a specified deadline.

The response could require the taxpayer to:

• take reasonable steps to correct the inaccuracy;
• make a disclosure where a direct amendment is not available; or
• explain why the document does not contain the specified inaccuracy.

This proposed notice is different from an ordinary request for information and different from HMRC's existing assessment or enquiry powers. The final notice format, delivery method, response period and appeal mechanics must be checked when the measure is enacted.

How penalties could interact with the proposal

The draft policy links correction behaviour to the existing inaccuracy penalty framework. It proposes that where a taxpayer receives their first Customer Correction Notice within a six-year period and takes reasonable steps to secure correction before the deadline, an inaccuracy penalty would generally apply only where the error was deliberate.

The proposal also says that if HMRC later finds an error after examining a correction, or where no correction is made, the error would be presumed careless unless it was deliberate or the taxpayer can show that reasonable care was taken in the first instance.

These are draft policy mechanics, not a new current penalty rate. The actual consequence will depend on the enacted provisions, the type of document, the taxpayer's conduct, the statutory time limit and the existing Schedule 24 penalty rules.

Which documents could be covered?

The draft legislation uses the documents covered by the existing inaccuracy-penalty framework. That can include tax returns and other documents provided to HMRC, subject to the final legislation and any tax-specific rules.

The proposal refers to direct and indirect taxes through the relevant existing legislation. A taxpayer should therefore identify the document, tax, period and statutory correction route before deciding what action is available.

Examples of documents that may need review include:

• Self Assessment returns;
• Corporation Tax returns;
• VAT and other indirect-tax documents;
• claims, elections or supporting statements; and
• other documents within the final Schedule 24 scope.

Do not assume that a Customer Correction Notice will replace an enquiry, assessment, VAT assessment or disclosure route. The existing statutory framework remains relevant until the final measure is implemented.

What should a taxpayer do after finding an error?

Even before the proposed rules take effect, the following process is sensible under current compliance practice:

Identify the exact error

Record the return or document, tax year, period, field, amount, date discovered and source of the error. Separate an arithmetic mistake from a classification or interpretation issue.

Check whether direct correction is available

Check the current amendment deadline, assessment time limits and tax-specific correction procedure. If direct amendment is not available, identify whether an unprompted disclosure, repayment correction, overpayment claim or other communication is appropriate.

Preserve the original evidence

Keep the filed return, working papers, source documents, software output, correspondence and the calculation of the correction. Do not overwrite the original file without retaining an audit trail.

Calculate tax, interest and penalties separately

The tax shortfall, interest and any penalty are distinct questions. Do not describe a correction as penalty-free merely because the tax has been paid, and do not assume that a draft proposal changes the current interest rules.

Document reasonable care

If the issue is later reviewed, evidence of the original checks, professional advice, source documents and correction steps can help establish the level of care taken. A contemporaneous record is stronger than a reconstruction made years later.

What to do if a future notice arrives

If the proposed Customer Correction Notice power is enacted and a notice arrives:

1. verify the tax, return and inaccuracy described;
2. note the response deadline and delivery method;
3. compare the notice with the filed document and working papers;
4. correct the error if the notice is accurate and correction is available;
5. notify or disclose where direct correction is unavailable;
6. explain clearly if the suspected inaccuracy is not present; and
7. keep proof of submission and the final calculation.

If the notice covers several periods or a material amount, obtain advice before responding, but do not allow the advice process to lose the notice deadline.

Current correction notice versus proposed Customer Correction Notice

Use the current correction notice guide for an actual notice. Use this page to understand the proposed future compliance direction.

What advisers and businesses should prepare

Businesses and advisers can prepare without treating the proposal as enacted by:

• adding an error-discovery and correction log;
• assigning an owner for each tax return and document;
• recording amendment and disclosure deadlines;
• preserving original returns and audit trails;
• defining when a professional review is required; and
• training staff to escalate a known error rather than silently overwriting it.

These controls support current reasonable-care expectations as well as the direction of the draft policy. They should be updated when HMRC publishes the final legislation, notice template and technical guidance.

Retain the original submission acknowledgement as well as the correction acknowledgement.

A correction file that explains the original error

Record the return or notice being corrected, the original figure, the corrected figure, the reason for the error, the date discovered and the evidence. Separate arithmetic mistakes from a changed interpretation of the law. If the correction affects several tax years, prepare a schedule for each year rather than changing one total and hoping the downstream figures update correctly.

Check whether the correction changes tax, interest, payments on account, a penalty or a claim made on another form. A refund generated by one correction may be offset against another liability. Keep the acknowledgement and reconcile the HMRC account after submission. If the error is outside the ordinary amendment route, use HMRC's stated disclosure or correction process and explain why.

Do not overwrite the original working papers. A version history helps show that the correction was made promptly and honestly, and it lets an adviser or HMRC understand the calculation without reconstructing it from a final number.

The correction file should also show who reviewed the issue, which official route was selected, when the correction was submitted and how the resulting HMRC account balance was checked. For a business, reconcile the corrected figure to the general ledger, VAT control account, payroll or Corporation Tax computation as applicable. For an individual, retain the calculation of amended tax, payments on account, interest and any repayment separately. This avoids treating a submitted form as proof that every downstream record has been updated.

Frequently Asked Questions

Read HMRC's policy paper and draft legislation before relying on the proposed rules. The final legislation and HMRC guidance will control the live process.

Official sources

• HMRC: Modernising the correction of errors
• HMRC: Draft legislation for correction of errors
• HMRC: Transformation Roadmap progress update 2026
• HMRC: Modernising the correction of errors collection