Fresh data has exposed that HM Revenue and Customs is losing the vast majority of cases when taxpayers challenge automated penalties, with experts now urging millions to fight back against fines as the self-assessment deadline looms.
Taxpayers Triumph in Majority of Appeals
The latest official statistics reveal that taxpayers have been successful in over 62% of appeals lodged against automated HMRC penalties. This significant victory rate indicates that countless individuals have managed to have fines for late filing or delayed payment overturned through the appeals process.
During the six-month period from 31 March to 30 September 2025, a substantial 32,258 appeals were submitted against automatic penalties distributed by HMRC. Out of these cases, taxpayers emerged victorious in 20,076 instances, while HMRC only prevailed in 37.8% of the total appeals.
Experts Warn Against Unnecessary Payments
Accountancy professionals are sounding the alarm that these statistics suggest numerous people who don't bother appealing may be unnecessarily spending hundreds of pounds. With the self-assessment deadline of 31 January 2026 now fewer than ten days away, HMRC has intensified its warnings to millions of taxpayers to settle their bills promptly.
In recent communications dispatched to those registered for self-assessment, HMRC stated: "Do you still need to pay your self-assessment tax bill? If so, you must make a payment by January 31, 2026 – or you may risk having to pay a penalty."
However, accountants maintain that the automated nature of HMRC's systems means penalties can be triggered even when taxpayers possess legitimate excuses for delays or errors.
Why Appealing Makes Financial Sense
Accountancy practice UHY Hacker Young has suggested that the magnitude of successful appeals demonstrates it's worthwhile contesting fines in most circumstances. The company emphasised: "The fact taxpayers win so many cases means that it's worth people appealing any automated fines they receive unless they feel they are in the wrong. If they do not, they are unnecessarily giving extra money to the taxman."
Neela Chuahan, partner at UHY Hacker Young, urged taxpayers not to assume HMRC's penalties are always correct. She 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."
Understanding HMRC's Penalty System
HMRC automatically imposes a £100 penalty if a self-assessment tax return is submitted late, even when there's no tax owed. Further penalties accumulate the longer the delay continues, creating a compounding financial burden for taxpayers.
Late payment penalties begin at 5% of the outstanding tax, applied after 30 days, and are repeated at six and twelve-month intervals. Interest charges are also added to any unpaid amounts, increasing the total financial impact.
Automatic penalties are similarly distributed for late VAT and corporation tax returns, overdue payments, incorrect returns, or failures to maintain proper records according to HMRC requirements.
Reasonable Excuses That Can Overturn Penalties
HMRC will scrap a penalty where it accepts the taxpayer has a "reasonable excuse" for their delay or error. Acceptable reasons can include computer failures, problems with the HMRC website, postal delays, serious illness, bereavement, or an adviser failing to submit a return on time despite proper instruction.
Taxpayers typically have a 30-day window from the date of a penalty notice to lodge an appeal. Those who miss this deadline must provide a valid reason for their delay in challenging the fine.
How to Lodge an Appeal
Appeals can be submitted through multiple channels including online portals, using the form attached with the penalty letter, or by writing a formal letter to HMRC. Taxpayers need to clearly explain why they believe the penalty is unjust or why they had a reasonable excuse for their situation.
HMRC's guidance recommends that people settle the penalty even if they appeal, as interest will be levied if the appeal fails and the fine remains unsettled. This precautionary approach prevents additional charges accumulating during the appeals process.
Broader Concerns About the System
Worries about HMRC's penalty system are far from new revelations. Last summer, the Tax Policy Associates think tank revealed through a Freedom of Information request that over the past five years, approximately 600,000 people had been hit with late filing penalties despite owing no tax whatsoever.
This substantial figure highlights systemic issues within the automated penalty system and reinforces why so many appeals are successful when properly challenged by informed taxpayers.
As the January deadline approaches, the combination of HMRC's warnings and the proven success rate of appeals creates a crucial decision point for millions of taxpayers facing potential penalties.
