From 1 April 2028, every taxpayer will have a legal duty to put right an inaccuracy once they become aware of it, and HMRC will be able to issue a Customer Correction Notice (CCN) requiring you to review a specific entry and either correct it, disclose more, or confirm no correction is needed. This is a significant shift in how errors in tax returns are handled.
The reform, known as "modernising the correction of errors", sits in Finance Bill 2026-27. It was confirmed to proceed at the Autumn Budget on 28 October 2026, with draft legislation published on 13 July 2026 and a technical consultation that ran from 13 July to 7 September 2026. Below is a plain-English guide to what it means for sole traders, landlords, company directors and small businesses.
Important: this is draft legislation commencing 1 April 2028, and its detailed design is still being worked through. Treat this as general guidance, not final law or personal advice.
What is changing from 1 April 2028?
Today, if you spot a mistake in a submitted return you are encouraged to amend it, but there is no single, explicit legal duty to act the moment you become aware. From 1 April 2028 that changes in two ways:
- A general duty to correct: once you become aware of an inaccuracy, you must take corrective action within HMRC's existing assessment time limits.
- Customer Correction Notices: HMRC gains a formal power to write to you about a specific suspected inaccuracy and require a response.
The aim is to make it clearer, and faster, for genuine errors to be fixed, while giving HMRC a sharper tool against those who sit on known mistakes.
What does the general duty to correct require?
Once you become aware of an inaccuracy in a return or document that falls within Schedule 24 of the Finance Act 2007, you must take corrective action. In practice that means amending the return, or notifying HMRC where direct correction is not possible, while HMRC is still within its existing time limits for raising an assessment.
The sting is in the tail. If you become aware of an inaccuracy and do not take reasonable steps to correct it, the inaccuracy is treated as deliberate, both for penalty purposes and for the assessment time limit. A simple, honest slip that you knowingly leave unfixed can therefore be recategorised at the most serious end of the scale, extending HMRC's reach back as far as 20 years. The message is blunt: never leave a known mistake unfixed.
What is a Customer Correction Notice and how do you respond?
A Customer Correction Notice (CCN) is a formal notice HMRC may issue where it has reason to suspect an inaccuracy in a document. It points you at a specific entry and asks you to look again. You must respond in one of three ways:
- Correct the inaccuracy if you agree there is an error.
- Make a disclosure if there is more HMRC needs to know.
- Confirm no correction is required if, having reviewed it, you are satisfied the entry is right.
A CCN is not the same as a full enquiry, but it should be taken just as seriously. If you receive one, read our guide to how an HMRC compliance check works, and get advice before you reply. How you respond directly affects whether a penalty applies and how far back HMRC can look.
The first-notice safe harbour: your first honest slip in six years
The reform includes a genuinely helpful protection. There is no careless-error penalty where you either make an unprompted disclosure, or take reasonable steps to secure a correction after receiving your first Customer Correction Notice within a six-year period.
In other words, an honest first mistake that you put right does not attract an inaccuracy penalty. You still pay the tax that was due and interest on it, but the penalty is removed. The safe harbour only covers your first CCN in that six-year window, so it is a one-off cushion, not a blanket amnesty.
The presumption of carelessness: the burden reverses
Normally HMRC has to show that an error was careless before a careless penalty can apply. Under the new rules this flips. Errors HMRC finds on reviewing your response to a CCN, or on a failure to respond, are presumed careless, unless the inaccuracy was deliberate or you can show you took reasonable care in the first instance.
This reversal is why good records matter so much. If you can evidence the care you took when you prepared the return, you can rebut the presumption. If you cannot, the default position is a careless penalty.
What are the inaccuracy penalty rates?
Penalties follow the long-standing Schedule 24 Finance Act 2007 framework. They are charged as a maximum percentage of the potential lost revenue (PLR), which is broadly the tax that would have been lost had the error gone uncorrected.
| Behaviour | Maximum penalty (% of potential lost revenue) |
|---|---|
| Careless | 30% |
| Deliberate but not concealed | 70% |
| Deliberate and concealed | 100% |
These are maximums. Penalties can be reduced for the quality of your disclosure, and an unprompted disclosure attracts the largest reduction. That is a strong incentive to come forward before HMRC prompts you. For how interest is added on top of any tax and penalty, see our guide to HMRC interest and penalties on late payment.
How far back can HMRC go? Assessment time limits
The behaviour behind an error also sets how many years HMRC can reach back to assess, under the Taxes Management Act 1970.
| Behaviour | Assessment time limit |
|---|---|
| Innocent error | 4 years |
| Careless behaviour | 6 years |
| Deliberate behaviour | 20 years |
This is the practical reason the "treated as deliberate" rule bites so hard. Leaving a known mistake unfixed can turn a four-year window into a twenty-year one.
Worked example: a sole trader's first CCN
Imagine a sole trader receives their first Customer Correction Notice. It queries an entry that produces £800 of potential lost revenue, which is the tax that would otherwise have gone uncollected.
- If they correct it and pay: because it is their first CCN within the six-year period and they take reasonable steps to fix the error, the safe harbour applies. There is no inaccuracy penalty, only the tax due and interest.
- If they ignore it: the error can be treated as deliberate. A penalty of up to 70% of £800 is £560, on top of the tax and interest, and the assessment window extends to 20 years.
Same £800 of tax at stake, two very different outcomes. The difference is simply whether the trader acted on the notice. If you report rental income, the same logic applies: our guide to declaring rental income on self assessment explains the common slips landlords make.
Who is affected?
The duty applies to anyone who files a return or document within Schedule 24 of the Finance Act 2007. That is a wide net:
- Self assessment taxpayers, including those with a side hustle or online sales income.
- Sole traders and the self-employed.
- Landlords declaring property income.
- Limited companies and their directors.
- VAT-registered businesses.
If you are not sure whether you even need to file, start with do I need to do a self assessment. Everyone inside the system should understand the new duty.
What should you do now?
Nothing takes legal effect before 1 April 2028, but the habits that protect you are worth building today:
- Keep good records. Clear evidence of the care you took lets you rebut the presumption of carelessness.
- Respond promptly to any HMRC notice. Delay is what pushes an error towards being treated as deliberate.
- Never leave a known mistake unfixed. Correcting a genuine error, ideally as an unprompted disclosure, keeps you in the lowest penalty band and often removes the penalty entirely.
- Get advice before responding to a CCN. The right answer (correct, disclose, or confirm) depends on the facts, and it affects both penalties and time limits.
If you want a professional to review your returns and tax position before these rules land, or to help you respond to a notice, book a free call with Zmartly and we will walk you through it.
Frequently asked questions
When does the duty to correct tax return errors start?
It is due to commence on 1 April 2028 under Finance Bill 2026-27. The reform was confirmed to proceed at the Autumn Budget on 28 October 2026, but it is still draft legislation whose detailed design is being worked through, so treat this as general guidance, not final law.
What happens if I ignore a Customer Correction Notice?
If you become aware of an inaccuracy and do not take reasonable steps to correct it, the inaccuracy is treated as deliberate for both penalty purposes and the assessment time limit. That can mean a penalty of up to 70% of the potential lost revenue and an assessment window stretching back 20 years.
Will I always get a penalty after a Customer Correction Notice?
No. If it is your first Customer Correction Notice within a six-year period and you take reasonable steps to correct the error, or make an unprompted disclosure, the safe harbour means no careless-error penalty applies. You would still pay the tax due and interest.
Who does the new duty to correct apply to?
Anyone who files a return or document within Schedule 24 of the Finance Act 2007: self assessment taxpayers, sole traders, landlords, limited companies and their directors, and VAT-registered businesses.
Sources
- GOV.UK: Modernising the correction of errors, general taxpayer obligation and HMRC Customer Correction Notice
- GOV.UK: CC/FS7a Penalties for inaccuracies in returns and documents
- GOV.UK: Self Assessment tax returns, if you need to change your return
- GOV.UK: Tell HMRC about underpaid tax from previous years
- GOV.UK: Disagree with a tax decision, penalties
