Fresh figures reveal that HM Revenue & Customs (HMRC) is losing the majority of penalty appeals, with taxpayers triumphing in over 62% of cases. Between 31 March and 30 September 2025, 32,258 appeals were lodged against automated penalties, and taxpayers won 20,076 of them, while HMRC prevailed in only 37.8% of instances.
The data has prompted experts to urge more people to challenge automatic fines, warning that those who do not appeal may be unnecessarily paying hundreds of pounds. With the self-assessment deadline of 31 January 2026 approaching, HMRC has intensified warnings to millions to settle their bills on time or risk penalties.
Accountancy firm UHY Hacker Young said the high success rate makes it worthwhile to contest fines in most circumstances. Partner Neela Chuahan explained: 'When you appeal you have the opportunity to provide evidence and argue your case. Given HMRC's success rate, you are more likely than not to win an appeal against the taxman and overturn an automatic penalty.'
HMRC automatically issues a £100 penalty for late self-assessment returns, even if no tax is owed, with further penalties for prolonged delays. Late payment penalties start at 5% of the outstanding tax after 30 days, repeated at six and 12 months, plus interest. Penalties also apply to late VAT and corporation tax returns, overdue payments, incorrect returns, and record-keeping failures.
HMRC will cancel a penalty if it accepts a 'reasonable excuse', such as computer failures, website issues, postal delays, serious illness, bereavement, or an adviser's failure to file on time. Taxpayers have 30 days from the penalty notice to appeal, and can do so online, via the form attached to the letter, or by writing to HMRC.
An HMRC spokesperson said: 'We’re committed to helping customers to get their tax right and avoid fines altogether. We charge penalties to encourage customers to meet their obligations, while acting as a sanction for those who don’t. Most automated penalties we issue each year are correct, with just one in every 140 requesting a review. When people have a reasonable excuse, we will cancel the penalty.'
