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Taxation (UK) · Penalties for non-compliance

Standard Penalties for Errors in Tax Returns (TX-UK)

Updated 11 October 2026 · Fact-checked

A standard penalty for errors applies when a return contains an inaccuracy that understates tax. It is a percentage of the potential lost revenue. The percentage depends on behaviour: careless, deliberate but not concealed, or deliberate and concealed. Disclosure to HMRC can reduce it to a minimum percentage.

Understand Standard Penalties for Errors

If you send HMRC a return that understates your tax, you may pay a penalty on top of the extra tax and interest. The penalty is not a flat sum. It is a percentage of the potential lost revenue (PLR), which is the extra tax HMRC would have missed if the error had not been found.

The percentage depends on your behaviour. There are three types. Careless means you did not take reasonable care. Deliberate but not concealed means you knew the return was wrong but did not hide it. Deliberate and concealed means you knew and also tried to hide it, for example by creating false documents.

The tax rates and allowances ACCA provides give a maximum penalty for each behaviour. They also give a minimum penalty, which depends on whether you told HMRC about the error yourself. A disclosure is unprompted if you make it when you have no reason to believe HMRC has discovered or is about to discover the error. Otherwise it is prompted.

The quality of disclosure matters too. Telling HMRC, helping them to quantify the error and giving access to records all earn a lower penalty within the range. So the exam answer has two parts: pick the behaviour, then place the penalty within the range using the disclosure.

Key rules to remember

Penalty
Penalty = PLR × penalty percentage
PLR is the extra tax due because of the error. The percentage must fall within the range for the behaviour and disclosure type.
Careless error
Maximum 30%; minimum 0% (unprompted); minimum 15% (prompted)
Failure to take reasonable care.
Deliberate but not concealed
Maximum 70%; minimum 20% (unprompted); minimum 35% (prompted)
The taxpayer knew the return was wrong but did not hide it.
Deliberate and concealed
Maximum 100%; minimum 30% (unprompted); minimum 50% (prompted)
The taxpayer knew and also took steps to hide the error.

How to solve Standard Penalties for Errors questions

Use this order for any question on penalties for errors.

  1. 1Find the potential lost revenue: the extra tax due because of the error. Use the tax figure, not the understated income.
  2. 2Decide the behaviour from the facts: reasonable care missing (careless), knowingly wrong (deliberate), or knowingly wrong with hiding (deliberate and concealed).
  3. 3Decide whether disclosure was unprompted or prompted.
  4. 4Write down the maximum and minimum percentages from the table for that behaviour and disclosure type.
  5. 5Use the quality of disclosure to choose a percentage in the range. If asked for the range, give both figures.
  6. 6Multiply PLR by the percentage, and state the range or the figure clearly.
  7. 7If asked, note that interest on the underpaid tax is charged separately.

Quickest way: Three-line penalty check

When to use it: Use this in Section A or B objective questions where you need only the maximum or minimum penalty.

  1. Remember the maximums as 30, 70, 100 for careless, deliberate, concealed.
  2. Remember the unprompted minimums as 0, 20, 30 and the prompted minimums as 15, 35, 50.
  3. Multiply the PLR by the one percentage the question asks for. Check that you used tax, not income.

Common mistakes in Standard Penalties for Errors

  • Applying the percentage to the understated income instead of the extra tax.

    The error is described as unreported income, so students use that figure.

    Fix: Work out the extra tax first. That is the PLR. Apply the percentage to it.

  • Mixing up prompted and unprompted minimums.

    The two columns look alike and are easy to swap.

    Fix: Unprompted is always the lower minimum. Prompted minimums are higher: 15%, 35% and 50%.

  • Treating every error as careless.

    Careless is the most common case, so it becomes a default.

    Fix: Read the facts. Knowledge of the error means deliberate. False invoices or hidden records mean concealed.

  • Giving one fixed percentage when the question asks for the range.

    Students think the penalty is a single rate.

    Fix: Give the minimum and maximum amounts when the question does not give the quality of disclosure.

  • Forgetting that a careless error disclosed unprompted can have a 0% minimum penalty.

    Students assume a penalty is always charged.

    Fix: State that the minimum is 0% for careless errors with unprompted disclosure, so no penalty may be due.

Worked examples

Example 1

Sam submitted a self-assessment return that omitted income. The omission failed to take reasonable care and caused £6,000 of extra tax to be due. HMRC found the error in an enquiry, so the disclosure was prompted. State the range of penalty.

Show the solution
  1. PLR = £6,000.
  2. Behaviour is careless, because reasonable care was not taken.
  3. Disclosure is prompted, because HMRC found the error.
  4. Careless: maximum 30%, minimum prompted 15%.
  5. Minimum = £6,000 × 15% = £900.
  6. Maximum = £6,000 × 30% = £1,800.

Answer: The penalty lies between £900 and £1,800. Interest on the unpaid tax is charged separately.

Example 2

Priya knowingly left out a business sale from her return and altered her records to hide it. The extra tax due is £40,000. Before HMRC contacted her, she told them about the error and gave full help. State the minimum and maximum penalty.

Show the solution
  1. PLR = £40,000.
  2. Behaviour is deliberate and concealed, because she knew and altered records.
  3. Disclosure is unprompted, because she told HMRC before any contact.
  4. Maximum = 100%, so £40,000.
  5. Minimum unprompted = 30%, so £40,000 × 30% = £12,000.
  6. Her full help and early disclosure support a penalty near the minimum.

Answer: The penalty range is £12,000 to £40,000. Her cooperation points towards the lower end.

Exam tips

  • Always show the PLR calculation on its own line. Marks are given for it even if the percentage is wrong.
  • Use the facts in the scenario to justify the behaviour in one short sentence.
  • In the objective tests, check whether the question asks for the maximum, the minimum or a range.
  • Learn the table by pattern: maximums 30, 70, 100; unprompted minimums 0, 20, 30; prompted minimums 15, 35, 50.
  • Mention that interest is charged separately only if the question asks about the total cost.

Practice questions from Penalties for non-compliance

Standard Penalties for Errors in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Standard Penalties for Errors: frequently asked questions

What is potential lost revenue?

It is the extra tax due because of the error in the return. The penalty percentage is applied to it. It is a tax figure, not the amount of income omitted.

What is the difference between prompted and unprompted disclosure?

Unprompted means you tell HMRC when you have no reason to think they have found the error or are about to. Prompted means you tell them after that point. Unprompted disclosure gives a lower minimum penalty.

Can a careless error carry no penalty?

Yes. For a careless error disclosed unprompted the minimum penalty is 0%. The actual penalty depends on the quality of the disclosure.

What are the maximum penalties?

The maximum is 30% for careless errors, 70% for deliberate but not concealed errors and 100% for deliberate and concealed errors. These are percentages of the potential lost revenue.