The Taxes Management Act 1970 is the statute that governs how income tax and capital gains tax are administered in the United Kingdom: who must file a return, when HMRC can look at it, how far back the agency can go to recover underpaid tax, and how you challenge a decision. Several of the Act’s original penalty provisions have been replaced by later legislation, but the framework for returns, assessments, and appeals still runs through this 1970 Act.
What the Act Still Governs
The core machinery sits in the 1970 Act: the duty to notify HMRC of a liability, the duty to file when a return has been issued, HMRC’s power to open an enquiry, its power to determine your tax when you don’t file, its power to raise a discovery assessment, the time limits on all of that, and your right of appeal. The penalty provisions have largely moved. Late-filing penalties now sit in Schedule 55 of the Finance Act 2009. Penalties for inaccurate returns sit in Schedule 24 of the Finance Act 2007. Information notice powers come from Schedule 36 of the Finance Act 2008. When you read a modern HMRC letter, expect it to cite a mix of these.
When You Have to File and Notify
Two duties can arise. Under Section 7, if you owe income tax or capital gains tax and HMRC hasn’t sent you a return, you have to tell the agency. You have six months from the end of the tax year in which the liability arose to do so.1Legislation.gov.uk. Taxes Management Act 1970 – Section 7 This typically catches new self-employment, a taxable property gain, or a first year of untaxed income. If HMRC has already issued you a notice to file, the notification duty doesn’t apply; you just complete the return.
Under Section 8, once HMRC issues a notice, you must deliver a return of your income, chargeable gains, and any reliefs or allowances claimed, with a declaration that the information is correct and complete to the best of your knowledge.2Legislation.gov.uk. Taxes Management Act 1970 – Section 8 For partnerships, the return must also show your share of partnership income, losses, and tax credits.
The deadlines depend on how you file. Paper returns must reach HMRC by 31 October following the end of the tax year. Online returns are due by 31 January, which is also the date your balancing tax payment falls due. If you make payments on account, a second instalment falls due on 31 July.3GOV.UK. Self Assessment Tax Returns – Deadlines
When HMRC Can Open an Enquiry
Section 9A lets HMRC open a formal enquiry into any self-assessment return. The agency must issue the notice within twelve months of the date you filed, provided you filed on or before the due date.4Legislation.gov.uk. Taxes Management Act 1970 – Section 9A File late and the window runs to the next quarter day (31 January, 30 April, 31 July, or 31 October) after the first anniversary of your actual filing date. The same extended rule applies to amendments: HMRC gets until the next quarter day after the anniversary of the amendment.
During an enquiry, HMRC can issue an information notice under Schedule 36 of the Finance Act 2008, compelling you to produce invoices, bank statements, or other documents relevant to your tax position. Ignoring one carries an initial penalty of £300 plus up to £60 per day of continued non-compliance. Providing inaccurate information in response can attract a separate penalty of up to £3,000 per inaccuracy.5Legislation.gov.uk. Finance Act 2008 – Schedule 36
If You Don’t File: Determinations
Section 28C lets an HMRC officer estimate your tax and issue a determination when you’ve been sent a notice to file and haven’t done so. The determination has the same legal force as a self-assessment for collection, so HMRC can pursue the debt straight away.6Legislation.gov.uk. Taxes Management Act 1970 – Section 28C Estimates draw on whatever HMRC already holds — prior-year figures, employer data, third-party reports — and they tend to run high.
A determination is displaced the moment you file your own return, but there are limits. HMRC has three years from the filing date to raise one, and you have twelve months from the date of the determination to file the return that supersedes it. Miss that twelve-month window and the estimate hardens into a bill that is very difficult to shift.
Discovery Assessments and How Far Back HMRC Can Go
When the enquiry window has closed, Section 29 is HMRC’s main tool. It allows an assessment where the agency discovers that tax has been under-assessed, profits have gone untaxed, or a relief was granted incorrectly.7Legislation.gov.uk. Taxes Management Act 1970 – Section 29 A discovery can be triggered by a tip-off, bank data, or something that surfaces during an enquiry into someone else.8GOV.UK. Enquiry Manual – EM1545
How far back HMRC can reach depends on what went wrong:
- Four years from the end of the relevant tax year: the standard limit for any income tax or capital gains tax assessment.
- Six years: where the loss of tax was brought about carelessly.
- Twenty years: where the loss was deliberate, where the taxpayer failed to notify a liability under Section 7, or where there was a breach of tax avoidance disclosure obligations.
The line between careless and deliberate is where the money is. Careless catches sloppy calculations or a forgotten source of income. Deliberate requires HMRC to show you knew. The difference is fourteen extra years of exposure, which is why the label attached to your conduct matters as much as the underlying tax.
Penalties
Late Filing
Section 93 of the 1970 Act was repealed in 2011.10Legislation.gov.uk. Taxes Management Act 1970 – Section 93 Late-filing penalties now sit in Schedule 55 of the Finance Act 2009 and escalate the longer you delay:
- One day late: an automatic £100 fixed penalty, whether or not any tax is owed.
- Three months late: daily penalties of £10 for up to 90 days, so up to a further £900.
- Six months late: a further £300, or 5% of the tax due, whichever is greater.
- Twelve months late: another £300 or 5% of the tax due. Where HMRC treats the delay as deliberate, this rises to 70% of the tax owed (deliberate but not concealed) or 100% (deliberate and concealed).
These penalties stack. A return more than a year late can carry the £100 initial charge, up to £900 in daily penalties, and two further percentage penalties on top.
Incorrect Returns
Section 95 of the 1970 Act was repealed in 2008.12Legislation.gov.uk. Taxes Management Act 1970 – Section 95 Inaccuracy penalties now sit in Schedule 24 of the Finance Act 2007 and are tied to your culpability:
- Careless error: up to 30% of the potential lost revenue.
- Deliberate but not concealed: up to 70%.
- Deliberate and concealed: up to 100%.
Those maximums can be reduced sharply when you tell HMRC about the error. An unprompted disclosure — one made before you have any reason to think HMRC is onto the problem — attracts the largest reductions: a careless error can drop to 0%, a deliberate error to 20%, and a deliberate and concealed error to 30%. Prompted disclosures produce smaller reductions, with minimums of 15%, 35%, and 50% respectively.13Legislation.gov.uk. Finance Act 2007 – Schedule 24 Coming forward before HMRC contacts you is consistently the cheaper route.
Interest
Interest runs on top of penalties, from the date tax was originally due until the date it is paid, and it accrues daily. The rate is Bank of England base plus 4%, standing at 7.75% as of January 2026.14GOV.UK. HMRC Interest Rates for Late and Early Payments There is no reasonable excuse defence to interest.
Reasonable Excuse
A late-filing or late-payment penalty can be cancelled if you had a reasonable excuse — something that genuinely stopped you from meeting the deadline. HMRC accepts examples including serious illness, the death of a close relative shortly before the deadline, an unexpected hospital stay, a fire or flood that destroyed your records, computer failure while preparing an online return, and problems with HMRC’s own online services.15GOV.UK. Disagree With a Tax Decision or Penalty – Reasonable Excuses
What HMRC will not accept: not having enough money to pay, finding the online system confusing, not receiving a reminder, or relying on someone else to file who let you down without you checking. You also have to act as soon as the excuse ends. If illness kept you off for two weeks, the excuse covers two weeks, not the three months that followed.
Appealing an HMRC Decision
Section 31 gives you a right of appeal against amendments to your self-assessment, closure notices issued at the end of an enquiry, discovery assessments, and other assessments that aren’t self-assessments.16Legislation.gov.uk. Taxes Management Act 1970 – Section 31 The notice of appeal must be in writing and must reach HMRC within 30 days of the date on the decision.17Legislation.gov.uk. Taxes Management Act 1970 – Section 31A Missing the 30 days doesn’t necessarily end your case, but you’ll need to apply for permission to appeal late, and HMRC isn’t required to grant it.
You can ask for a statutory review before going to tribunal. A different HMRC officer, one not involved in the original decision, takes a fresh look. Reviews normally take 45 days. For direct tax disputes such as income tax and capital gains tax, you must appeal to HMRC first before asking for a review. If you disagree with the review outcome, you have 30 days from the date on the review letter to notify an appeal to the tribunal.18GOV.UK. Disagree With a Tax Decision or Penalty – Get a Review
The First-tier Tribunal (Tax Chamber) is independent of HMRC and can uphold, reduce, or cancel an assessment or penalty.19GOV.UK. How to Appeal to the First-tier Tax Tribunal Proceedings are more formal than a review, and complex cases benefit from professional representation.
Alternative dispute resolution is a separate option, best suited to cases where communication has broken down or the dispute turns on facts rather than law. You can apply at any stage of an enquiry, or even during tribunal proceedings, though HMRC considers each application individually and can refuse. ADR is not available for cases under criminal investigation, debt recovery disputes, complaints about HMRC delays, or automatic late-filing penalties.20GOV.UK. Use Alternative Dispute Resolution to Settle a Tax Dispute If your application is accepted, you’ll need to respond to requests within 15 working days and attend a meeting within 90 days.