HMRC cancels record number of tax penalties – could yours be challenged? HMRC cancelled a record 48,189 tax penalties during the 2025/26 tax year, with new figures suggesting that challenging a penalty can be worthwhile if you believe it's been issued incorrectly. According to recent analysis, 65% of penalties challenged by taxpayers were cancelled. Most related to automatic fines for late filing or late payment, including the familiar £100 penalty for missing the Self Assessment deadline. Why are so many penalties being overturned? The number of cancelled penalties has been rising. The 48,189 cancelled in 2025/26 represents a 4% increase on the 46,266 overturned in 2024/25, and a reported 75% increase since 2020/21, when 5,499 penalties were cancelled during the pandemic. Many of these penalties are generated automatically, meaning there isn't necessarily someone reviewing the individual circumstances before a fine is issued. That doesn't mean every penalty is wrong, of course, but it does mean there can be circumstances that haven't been properly considered. Separate figures covering HMRC's statutory reviews, which deal with more complex tax disputes, also show an increase in decisions being changed. HMRC cancelled or amended 926 substantive decisions in 2025/26, up 35% from 688 the previous year. Meanwhile, the proportion of reviews that upheld HMRC's original decision fell from 73% to 67%. When might a penalty be challenged? One case highlighted by accountancy firm Price Bailey involved a taxpayer who received £1,600 in automated late filing penalties. The taxpayer believed their return had been successfully submitted after HMRC's online system appeared to indicate that the filing was complete. Subsequent emails from HMRC were diverted into a junk folder, meaning the problem wasn't identified until the penalties had accumulated. The case eventually reached a tax tribunal, which overturned the penalties, finding that easily missed automated communications did not amount to effective notice in those circumstances. It's a useful reminder that an automatically generated penalty isn't necessarily the final word, particularly where there are questions about whether HMRC's systems or communications have contributed to the problem. Does this mean HMRC is getting it wrong? Not necessarily in every case, but the figures do highlight the importance of reviewing penalties rather than simply assuming they're correct. Andrew Park, tax investigations partner at Price Bailey, pointed out that high-volume automated penalties lack human oversight when they're first issued. He explained that HMRC's independent internal reviewers provide an important additional check, allowing individual circumstances to be considered before disputes potentially reach a tribunal. Of course, the fact that 65% of challenged penalties were cancelled doesn't mean that 65% of all penalties issued by HMRC are incorrect. It tells us about the cases taxpayers chose to challenge, rather than every penalty HMRC issued. What should you do if you receive a penalty? The first thing is not to ignore it. Check what the penalty relates to, whether the information HMRC has used is correct and whether there are circumstances that might justify an appeal. There are time limits for challenging penalties, so it's important to act promptly rather than leaving the letter sitting on your desk. Equally, it's worth remembering that a genuine missed deadline doesn't automatically mean a penalty will be cancelled. HMRC will consider the circumstances, and an appeal needs to have a reasonable basis. For me, the interesting point from these figures is that HMRC's original decision isn't always the end of the matter. Automated systems are useful for handling large volumes of work, but they don't necessarily capture every individual circumstance. If you've received an HMRC penalty and aren't sure whether it's correct, get in touch. We can look at the circumstances and help you understand whether there may be grounds to challenge it.

I'm a motorcyclist and an accountant, so the Motorcycle Action Group's (MAG) campaign to increase the approved motorcycle mileage allowance caught my attention from two directions. The allowance has been 24p per mile since April 2002. That's nearly a quarter of a century without an increase, despite everything that's happened to the cost of fuel, servicing, insurance and generally keeping a vehicle on the road. Meanwhile, the approved rate for cars and vans increased from 45p to 55p for the first 10,000 business miles earlier this year. The motorcycle rate stayed exactly where it was. Now, I don't think motorcycles and cars should necessarily attract the same mileage allowance. They have different running costs, and it's reasonable for the tax system to recognise that. But there's a difference between recognising those differences and leaving one rate untouched for 24 years while another is reviewed and increased. MAG is asking the Treasury to increase the motorcycle allowance to 45p per mile in the Autumn Budget on 28 October. Having looked at its arguments, I think MAG has made a reasonable case for the increase, and it's a campaign I'm happy to support. I should probably declare my interest here. I use my motorcycle for some business journeys in my accountancy practice, so I benefit from the mileage rules myself. But I don't cover particularly high business mileage, and the financial difference to me personally would be fairly modest. My interest is more in whether the system makes sense and treats different forms of transport consistently. There's also a distinction worth making between a mileage allowance and the amount of money somebody actually receives. An employer can reimburse an employee for qualifying business mileage at HMRC's approved rate without that payment normally being subject to tax. Where an employer pays less, the employee may be able to claim tax relief on the difference, which isn't quite the same as receiving the missing mileage allowance. For a self-employed person using the simplified mileage method, the allowance reduces taxable profit rather than providing a reimbursement. So an increase from 24p to 45p wouldn't automatically put another 21p per mile into everybody's pocket. What I particularly like about MAG's campaign is that it hasn't simply demanded the same rate as cars. Instead, MAG has put together research and modelling to support its proposal, including estimates of how much the change might cost the Treasury. Its modelling suggests that increasing the rate to 45p could cost the Treasury no more than £34 million a year, even under its higher-cost scenario. That's MAG's estimate, rather than an independently verified Treasury costing, but at least it gives us something specific to examine and challenge. And I think that's a worthwhile approach. If we're going to argue that an allowance is unfair, we should be prepared to explain what a fairer allowance might look like and what changing it could cost. There's another aspect of the policy that interests me. We tend to think of mileage rates as if somebody at the Treasury has worked out the average cost of running each type of vehicle and arrived at a carefully calculated figure. In reality, the Treasury considers a range of factors when setting these rates, rather than applying one fixed cost formula. That seems entirely reasonable. Different vehicles have different costs, and there are wider questions about what forms of transport the government wants to encourage. Motorcycles generally occupy less road space than cars, particularly when parked, and can offer advantages in congested areas. They're not without environmental or other drawbacks, and I certainly wouldn't suggest that every motorcycle is especially economical to run. A large touring motorcycle and a small commuter bike are rather different propositions. But if wider policy considerations form part of the decision, it seems reasonable to ask whether motorcycles' potential contribution to reducing congestion and demand for road space is being given appropriate consideration. There's an interesting comparison with bicycles, too. Their approved mileage rate is 20p, just 4p less than motorcycles. I'm certainly not suggesting that the bicycle allowance should be reduced, and encouraging cycling is a perfectly legitimate policy objective. But it does raise the question of whether we're applying a consistent approach to different forms of transport, particularly if these allowances reflect wider policy considerations as well as running costs. Ultimately, I'd like to see mileage allowances based on current evidence, with a clear explanation of the reasoning behind them. If that produces different rates for different vehicles, fine. What is harder to justify is a motorcycle rate that hasn't changed since 2002, particularly when the car rate has recently been increased. MAG has made its submission to the Treasury, and the decision now rests with the government. Whether the Chancellor accepts the proposed 45p rate remains to be seen. I hope the campaign succeeds. Not because I expect to make a fortune from claiming a few extra pence on my own business journeys, but because I think there's a good case for reviewing an allowance that has been overlooked for far too long. You can read MAG's campaign and the reasoning behind its proposal here: https://mag-uk.org/a-pay-rise-for-motorcyclists-its-down-to-the-budget-now/ With the Budget due on 28 October, we shouldn't have too long to wait to see whether the Treasury agrees.