Introduction
Tax errors happen. Whether you’re an individual, sole trader, or company director, it’s easy to overlook income, miscategorise expenses, or miss deadlines. But when those errors come to light, the way you deal with them can make all the difference — especially when HMRC is involved.
This is where HMRC voluntary disclosure comes in. It’s a formal process that allows you to tell HMRC about any tax you owe before they catch the error themselves.
In this blog by The Taxcom, we’ll break down the HMRC voluntary disclosure process, who it’s for, what the benefits are, and how to use it effectively to reduce tax errors and penalties.
What Is HMRC Voluntary Disclosure?
HMRC voluntary disclosure is a system set up by HM Revenue & Customs that allows individuals and businesses to come forward about unpaid or underpaid tax. It’s a proactive step where you notify HMRC of any inaccuracies in your tax returns or omissions in your financial reporting.
In simple terms, it’s you telling HMRC before they tell you.
There are two main pathways through which voluntary disclosures can be made:
1. The Digital Disclosure Service (DDS)
The Digital Disclosure Service is HMRC’s central platform for submitting most types of voluntary disclosures. It covers:
- Income Tax
- Capital Gains Tax
- Corporation Tax
- VAT (in some cases)
- PAYE
If you’ve made a genuine mistake or neglected to declare some income, this is usually the route you’ll take.
2. Special Disclosure Campaigns
Occasionally, HMRC opens targeted campaigns that invite certain taxpayer groups (e.g. landlords, offshore account holders, or medical professionals) to disclose income. These campaigns offer a limited-time opportunity for better terms if you act within the deadline.
Some past examples include:
- The Let Property Campaign
- The Second Incomes Campaign
- The Credit Card Sales Campaign
When Should You Use Voluntary Disclosure?
You should consider HMRC voluntary disclosure if:
- You realise you underreported income on a previous tax return
- You made a clerical or calculation error
- You claimed relief or deductions you weren’t entitled to
- You failed to register for a relevant tax (e.g. VAT or Self Assessment)
- You received foreign income or assets you didn’t report
- HMRC hasn’t contacted you yet about the issue
If HMRC contacts you first — through a compliance check or tax investigation — you lose the chance to disclose voluntarily and face higher penalties.
Is It Confidential?
Yes. HMRC treats disclosures with confidentiality, though they reserve the right to investigate further if something doesn’t look right. However, making a full, honest disclosure is seen as cooperative behaviour, and that counts in your favour.
Why It Pays to Disclose Voluntarily: Penalties vs. Proactive Action
One of the biggest misconceptions around tax disclosures is that if you admit a mistake, HMRC will punish you harshly. In fact, the opposite is often true.
The HMRC voluntary disclosure system is designed to encourage honesty, not penalise it.
Let’s look at how the system works and what you gain by disclosing before HMRC gets involved.
HMRC’s Penalty System: How It Works
HMRC applies financial penalties based on three factors:
- The behaviour behind the error
- Whether the error was disclosed voluntarily or prompted
- The quality and timing of the disclosure
Errors are categorised as:
| Behaviour Type | Penalty Range (Prompted) | Penalty Range (Unprompted) |
| Careless | 15% to 30% | 0% to 30% |
| Deliberate | 35% to 70% | 20% to 70% |
| Deliberate & Concealed | 50% to 100% | 30% to 100% |
An unprompted disclosure means you came forward before HMRC started any investigation. That’s key. It shows willingness to put things right and results in significantly lower penalties.
What You Could Save
Let’s say you failed to declare £20,000 in rental income over 3 years. If HMRC finds out through their own checks, you could face:
- Back taxes
- Interest charges
- A penalty of 35–70% (or more) of the unpaid tax
But if you disclose the error voluntarily:
- You may pay only 20–30% in penalties, or even no penalty at all in careless error cases
- You demonstrate full cooperation, reducing the risk of further scrutiny
The cost difference can be thousands of pounds.
Legal Protection: Avoiding Prosecution
In cases of serious fraud, disclosing voluntarily through the Contractual Disclosure Facility (CDF) can protect you from criminal charges. This is part of HMRC’s Code of Practice 9 (COP9).
It’s not an amnesty — but it’s an offer: full disclosure in exchange for immunity from prosecution.
Your Reputation Matters
For business owners, landlords, or professionals, being subject to a formal investigation or tribunal can damage credibility. By using HMRC voluntary disclosure:
- You’re seen as responsible and proactive
- You reduce reputational risk
- You avoid deeper reviews of your accounts or audits
Common Tax Errors That Lead to Disclosure
Not every tax mistake is deliberate. Many voluntary disclosures begin with taxpayers spotting oversights that seemed minor at the time but added up over years. HMRC understands this — which is why the voluntary disclosure facility exists.
Here are the most common types of errors that lead people to use HMRC voluntary disclosure:
1. Undeclared Rental Income
This is one of the most frequent issues HMRC flags. Many landlords:
- Inherit a property and forget to declare the rental
- Rent out a room or flat informally
- Don’t realise they must declare overseas property income
The Let Property Campaign was launched specifically to address this. If you’ve earned income from letting property and haven’t reported it, voluntary disclosure is the smart move.
2. Incorrect Self Assessment Returns
This can include:
- Missed income from freelance work, consulting, or side jobs
- Underreported dividends or savings interest
- Errors in allowable expenses
Often, these mistakes are careless rather than fraudulent, but they still require correction — and voluntary disclosure is the route to do it safely.
3. Offshore Income and Assets
Foreign income — including bank interest, pensions, investments, or shares — must be reported, even if it’s taxed abroad.
The Requirement to Correct (RTC) rule and the Common Reporting Standard allow HMRC to access data from over 100 jurisdictions. If you hold offshore assets and haven’t disclosed the tax correctly, using voluntary disclosure is essential to avoid higher penalties (which can be 200% of the tax owed under RTC).
4. Unregistered Businesses
Some individuals or partnerships operate without registering for:
- Self Assessment
- VAT (where turnover exceeds the threshold)
- Corporation Tax (if incorporated)
This can happen through misunderstanding — e.g. online sellers, influencers, tutors — but it’s still classed as non-compliance. Disclosing voluntarily before HMRC identifies it can mean lower penalties and no prosecution.
5. PAYE and Payroll Mistakes
Small businesses or employers may make errors in:
- Reporting benefits-in-kind
- Incorrect tax codes
- Missing Real Time Information (RTI) submissions
These can result in underpaid Income Tax or National Insurance. Voluntary disclosure lets you put things right without triggering a full employer compliance check.
6. VAT Miscalculations
Common VAT issues include:
- Applying the wrong rate
- Reclaiming VAT on ineligible expenses
- Not registering when over the threshold
HMRC often uncovers VAT discrepancies during broader tax reviews. Declaring them voluntarily limits financial exposure and shows good governance.
How to Make a Voluntary Disclosure to HMRC — Step by Step
Making a voluntary disclosure to HMRC isn’t just about sending an email or ticking a box. It’s a structured process, and following it correctly can make a big difference in how your case is assessed.
Here’s a step-by-step guide to making an HMRC voluntary disclosure using the Digital Disclosure Service (DDS) — the most commonly used route.
Step 1: Notify HMRC of Your Intent to Disclose
You must first let HMRC know you plan to make a voluntary disclosure. You do this by:
- Filling in the notification form online via the Digital Disclosure Service
Once submitted, you’ll get a disclosure reference number (DRN) and payment reference number (PRN). These will be used throughout the process.
You then have 90 days to prepare and submit your full disclosure.
Step 2: Gather Your Financial Records
Before you disclose, review your records and identify:
- Which tax years are affected
- The nature of the mistake or omission
- All sources of undeclared income or incorrect claims
- What tax is due
- Any interest or penalties
This is where professional advice can make or break your disclosure. Accountants and tax advisers familiar with the process can:
- Spot errors you might miss
- Help calculate accurate liabilities
- Ensure your explanation meets HMRC’s expectations
Step 3: Calculate What You Owe
You’ll need to include:
- The amount of unpaid tax
- Interest on the overdue tax
- Your proposed penalty
HMRC expects you to propose the correct penalty range, based on:
- How the error happened (careless or deliberate)
- Whether it was concealed
- How early you disclosed it
Being realistic — and honest — helps build credibility.
Step 4: Submit the Disclosure
You submit your disclosure online, using the Digital Disclosure Service. Your submission should include:
- A disclosure form detailing the tax owed
- A statement of behaviour explaining how the error occurred
- A declaration that the information is complete and correct
If you’re using a campaign (e.g. Let Property Campaign), use the relevant campaign form instead.
Step 5: Pay What You Owe
You’re expected to pay the full amount at the time of submission, using the PRN provided.
If you can’t pay in full, you must propose a payment arrangement — and HMRC may agree if your offer is reasonable.
Step 6: Wait for HMRC’s Response
HMRC may:
- Accept your disclosure as submitted
- Ask for clarification
- Open a formal investigation (if the disclosure is incomplete or misleading)
If your disclosure is full, honest, and well-prepared, you’ll likely avoid further action.
What Happens After You Make a Disclosure?
Submitting your HMRC voluntary disclosure is not necessarily the end of the story. What happens next depends on the accuracy, completeness, and honesty of your disclosure — and how HMRC assesses it.
Here’s what to expect after you hit submit.
1. HMRC Reviews the Disclosure
Once received, HMRC will review your submission to determine:
- Whether the disclosure is complete and accurate
- Whether the explanation for the error is plausible and consistent
- If the proposed penalty level is appropriate
- Whether additional information or clarification is needed
Most disclosures — when made in good faith and backed by documentation — are accepted without issue. HMRC may respond within weeks, though complex cases can take longer.
2. Request for Additional Information (if required)
In some cases, HMRC may:
- Ask for supporting documents
- Seek clarification on timelines or sources of income
- Question your categorisation of behaviour (e.g. careless vs. deliberate)
This does not mean they’ve rejected your disclosure — it just means they want assurance that your submission is accurate and thorough.
3. Acceptance or Rejection
After reviewing your submission, HMRC will either:
Accept the disclosure — and confirm the matter is settled
Reject it — if the information is misleading, incomplete, or obviously inaccurate
If it’s rejected, HMRC may:
- Open a formal investigation
- Increase penalties
- Withdraw any leniency offered
This is why full honesty and transparency are critical from the outset.
4. Payment Processing
Once your payment is received and your disclosure is accepted:
- The debt is cleared
- HMRC will update your tax records
- You’ll receive written confirmation that the matter is closed
If you set up a payment plan, HMRC will monitor payments. Missed instalments may void the agreement.
5. Your Risk Profile Improves
Disclosing voluntarily — and cooperating fully — sends the right signals. It helps:
- Lower your risk rating in HMRC’s internal systems
- Reduce the likelihood of future audits or checks
- Demonstrate your commitment to tax compliance
For professionals, landlords, company directors, or business owners, this kind of reputational cleanup can be crucial.
6. No Public Listing
Unlike prosecutions or named-and-shamed lists for deliberate tax defaulters, accepted voluntary disclosures are not made public. Your disclosure stays private unless HMRC later finds dishonesty or fraud.
What If You Don’t Disclose and HMRC Finds Out?
Choosing not to disclose errors or omissions in your tax affairs may seem like a way to avoid uncomfortable conversations — but it can backfire severely.
If HMRC discovers the issue on their own — through data analysis, tip-offs, or compliance checks — the consequences are more serious, more expensive, and sometimes criminal.
1. Higher Penalties
Once HMRC initiates contact, any opportunity for an unprompted disclosure is lost. That automatically pushes you into a higher penalty range.
Let’s compare:
| Type of Disclosure | Typical Penalty for Careless Error |
| Unprompted (Voluntary) | 0% – 30% |
| Prompted (HMRC finds issue) | 15% – 30% |
For deliberate errors, that gap gets even wider:
| Deliberate Error | Penalty Range |
| Unprompted Disclosure | 20% – 70% |
| Prompted Disclosure | 35% – 70% |
And for deliberate and concealed behaviour, penalties can reach 100% or more of the tax owed.
2. Interest on Tax Owed
HMRC charges interest from the date the tax should have been paid. Waiting longer just increases the cost.
And unlike penalties, interest is non-negotiable — even in voluntary disclosures.
3. Increased Scrutiny of Your Affairs
Once HMRC opens a case, they don’t just stop at one issue. They may expand the review to:
- Other tax years
- Other sources of income
- Connected entities or family members
- Offshore accounts
- Previous claims or reliefs
What began as a minor discrepancy can spiral into a full-blown financial investigation or audit — with mounting costs and reputational damage.
4. Naming and Shaming
If HMRC decides the error was deliberate and over £25,000, they may publish your name on the list of deliberate defaulters — available publicly on GOV.UK. This list is indexed by search engines and can impact:
- Future business relationships
- Professional licensing or accreditation
- Mortgage or finance applications
Voluntary disclosure avoids this completely.
5. Prosecution
In serious cases involving fraud or evasion, HMRC can:
- Refer your case to the Crown Prosecution Service
- Seize assets or freeze bank accounts
- Bring criminal charges
This is rare for straightforward tax errors — but more likely where the taxpayer concealed income or ignored HMRC warnings.
6. You Lose Control of the Process
By failing to disclose and letting HMRC lead the process, you:
- Lose the chance to frame your explanation
- Surrender any leverage over the penalty outcome
- Are more likely to face adversarial treatment
Voluntary disclosure allows you to get ahead of the issue, tell your side, and control the narrative.
Frequently Asked Questions
What is HMRC voluntary disclosure?
HMRC voluntary disclosure is a formal process that allows individuals or businesses to come forward and correct tax errors or omissions before HMRC contacts them. It gives taxpayers the chance to pay what they owe, explain how the error occurred, and often receive lower penalties for doing so.
Who should use HMRC voluntary disclosure?
You should consider using HMRC voluntary disclosure if you:
- Failed to report all your income
- Claimed incorrect reliefs or allowances
- Didn’t register for a tax (e.g. Self Assessment or VAT) when required
- Realised you made a mistake in a past tax return
- Have offshore income or assets you didn’t disclose
If HMRC hasn’t yet contacted you about the issue, voluntary disclosure is your best route to avoid higher penalties and potential legal action.
What types of tax can be disclosed using HMRC voluntary disclosure?
You can use HMRC voluntary disclosure to report errors or omissions related to:
- Income Tax
- Capital Gains Tax
- Corporation Tax
- VAT (in some cases)
- PAYE and National Insurance
- Offshore income and gains
Each of these can be reported through HMRC’s Digital Disclosure Service (DDS), or through targeted campaigns like the Let Property Campaign.
How long do I have to make a full disclosure after notifying HMRC?
Once you notify HMRC of your intention to use the HMRC voluntary disclosure process, you are given 90 days to submit your full disclosure, which includes:
- Details of the tax you owe
- A statement of the behaviour that led to the error
- Calculations of tax, interest, and proposed penalties
- Payment (or proposal of a payment plan)
It’s critical to stick to this 90-day deadline to remain eligible for reduced penalties.
Can I make a voluntary disclosure if I haven’t submitted tax returns at all?
Yes. Even if you’ve never filed a return, you can still use HMRC voluntary disclosure to come forward and correct that. HMRC prefers you disclose voluntarily rather than wait until they find out, which could trigger more severe penalties or investigations.
How far back do I need to disclose?
This depends on the type of error and your behaviour:
- Careless errors: up to 6 years
- Deliberate errors: up to 20 years
- Offshore matters: HMRC may go back up to 12 years (or 20 if deliberate)
A professional adviser can help determine how many years you need to disclose under HMRC voluntary disclosure.
Can I make a voluntary disclosure on behalf of a company?
Yes. Company directors or tax agents can use HMRC voluntary disclosure to correct Corporation Tax, VAT, or PAYE issues for a business. This includes:
- Underpaid Corporation Tax
- Undeclared business income
- Improper VAT claims or missed VAT registration
- Payroll or benefit reporting errors
What happens if I don’t use HMRC voluntary disclosure and HMRC finds out?
If you fail to use HMRC voluntary disclosure and if during the HMRC tax investigation process the issue is uncovered (through an audit, data match, or third-party report), you lose the benefit of unprompted disclosure. This means:
- Higher penalties
- Less negotiation room
- Greater reputational and financial damage
- In some cases, criminal investigation
Disclosing voluntarily always puts you in a stronger legal and financial position.
Can I get professional help with HMRC voluntary disclosure?
Absolutely. Many disclosures involve complex income streams, multi-year issues, or offshore assets. Tax professionals specialising in HMRC voluntary disclosure can:
- Accurately calculate your liabilities
- Classify the behaviour correctly (careless vs. deliberate)
- Reduce penalties through proper framing
- Handle correspondence with HMRC on your behalf
In complex cases, a good adviser is the difference between an efficient resolution and a drawn-out investigation.
Is the HMRC voluntary disclosure process confidential?
Yes. HMRC treats disclosures as confidential. They won’t publish your name if you disclose voluntarily and honestly. The public “deliberate defaulters” list only applies if HMRC determines you deliberately evaded tax and your disclosure was incomplete or misleading.
What’s the difference between the Digital Disclosure Service and Let Property Campaign?
The Digital Disclosure Service (DDS) is HMRC’s general-purpose platform for most types of voluntary disclosure. The Let Property Campaign is a specialist route for landlords who have undeclared rental income. Both are voluntary disclosure tools, but the Let Property Campaign offers simplified terms specifically for property-related disclosures.
Can I disclose income from overseas using HMRC voluntary disclosure?
Yes. Overseas income, gains, or assets must be disclosed. Failing to report foreign income can result in severe penalties, especially under the Requirement to Correct (RTC) rules. Using HMRC voluntary disclosure for offshore matters can prevent penalties of up to 200% of the tax owed.
What are the risks of doing nothing?
Ignoring a tax problem won’t make it go away. HMRC uses powerful data analytics, international agreements, and digital tracking to find undeclared income. Failing to use HMRC voluntary disclosure when you know there’s an issue can lead to:
- 100%+ penalties
- Criminal prosecution
- Business disruption
- Damage to your personal or professional reputation
Coming forward is not just the safe option — it’s the smart one.
Take Control of Your Tax Position, Before HMRC Does
If you think you’ve made a mistake in your tax affairs — whether it’s missed income, offshore assets, or years of unfiled returns — now is the time to act. The longer you wait, the more risk you carry.
At The Taxcom, our experts specialise in HMRC voluntary disclosure. We’ve helped hundreds of individuals and businesses correct their tax records, reduce penalties, and avoid legal trouble — quickly, discreetly, and with minimal disruption.
Avoid stress, minimise cost, and do it right. Contact us Today.