Compliance
Compliance Alert: HMRC Steps Up Enforcement & Penalties from 2026
UK’s HMRC is increasing compliance efforts with new sanctions on tax-advice non-compliance, crackdowns on avoidance promoters, and growing penalties under Budget 2025—learn what to watch out for.
By NomadicTax Research Team • 5-8 min read • March 18, 2026
## What’s Changing under UK Policy
Budget 2025 introduces several compliance-focused reforms, many coming into force **from 6 April 2026** or via regulations or consultations earlier. Key changes include:
- **Enhanced sanctions** for tax advisers who facilitate client non-compliance. Legislated changes will come in the Finance Bill 2025-26. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))
- **Closing loopholes** on non-resident capital gains, diverted profits, transfer pricing, and permanent establishments to increase fairness for UK-resident taxpayers. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))
- **Anti-avoidance for trusts** and international property trust charges; challenges to image rights payments treated as employment income. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html?utm_source=openai))
- **Penalty reform**: Inaccuracy and failure to notify penalties tightened up. Growth in penalties for late submission/payment under the reformed regime for ITSA (making tax digital and income tax self-assessment) from April 2027. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))
## Practical Implications for Taxpayers & Advisors
### Small Businesses & Advisors
- Advisors need to ensure the services they provide do not cross into facilitation of non-compliance—they could be personally liable under enhanced sanctions. Keep detailed documentation and formal advice scopes.
- Reexamine trust structures and non-resident investments now to see if charges will increase under reformed anti-avoidance rules.
### Non-Resident Individuals & Multinationals
- Expect more scrutiny on permanent establishment, related party transactions, diverted profits. Transfer pricing compliance must be tight.
- Image rights: where payments are connected to employment or representation, they may now be reclassified and taxed as employment income. Ensure contracts reflect true nature of rights.
### Self Assessment & Penalties
- From **1 April 2027**, new penalty regime for ITSA & VAT will be fully applied. Late payment penalties will increase and thresholds shorten. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))
- Quarterly updates under Making Tax Digital will attract penalties after April 2027—get ready for new workflows & filing cadence. ([gov.uk](https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar?utm_source=openai))
## Actionable Advice
1. **Review advisory agreements and contracts** to align with legal standards—avoid facilitation exposure.
2. **Audit your trust, structure and residency status now**—look for offshore exposures or past planning that might attract new charges.
3. **Plan for penalty changes**: set up systems to avoid missing deadlines; consider automation for tax filings & VAT returns.
4. **Train staff or engage experts** in transfer pricing, image rights, and non-residence rules to manage compliance proactively.
## Example Scenario
*A UK small-mid-sized creative agency that contracts with influencers who provide image rights payments.* Under new rules, these payments may be taxed as employment income rather than capital or license income. The agency should: revise contracts to clarify employment vs independent contractor status; ensure PAYE/NIC is applied where necessary.
By taking early action, taxpayers and their advisors can avoid steep penalties, unanticipated liabilities, and reputational risks when these compliance reforms take effect.