Making a voluntary disclosure to HMRC — telling them about unpaid tax before they find it themselves — can reduce penalties to as low as zero for innocent errors, and significantly reduces them even for deliberate ones. Here is how the process works, what HMRC expects, and what to do if you have undeclared income.
Why Voluntary Disclosure Matters
HMRC uses sophisticated data-matching to identify taxpayers with undeclared income. They receive data from banks, letting agents, PAYE employers, pension providers, overseas tax authorities, and Companies House. If HMRC contacts you about a discrepancy before you disclose, you lose the “unprompted” status — and your penalties increase substantially.
Penalty comparison: unprompted vs prompted disclosure
| Error type | Voluntary (unprompted) penalty | HMRC-prompted penalty |
|---|---|---|
| Innocent error | 0% | 0–30% |
| Careless error | 0–30% | 15–30% |
| Deliberate error | 30–100% | 50–200% |
| Deliberate + concealment | 30–100% | 50–200% |
Note: interest on unpaid tax accrues from the original due date regardless of whether disclosure is voluntary or prompted.
Common Reasons People Need to Make a Disclosure
| Situation | HMRC programme to use |
|---|---|
| Undeclared rental income | Let Property Campaign |
| Offshore bank accounts or assets | Worldwide Disclosure Facility |
| Undeclared self-employment/freelance income | Digital Disclosure Service |
| Errors on past Self Assessment returns | Digital Disclosure Service |
| VAT errors | VAT Errors Correction (VAT652) |
| Undeclared employment income or benefits | Digital Disclosure Service |
| PAYE employer errors | Employer Disclosure |
The Digital Disclosure Service
For most personal tax disclosures not covered by a specific campaign, use HMRC’s Digital Disclosure Service (DDS) at gov.uk/government/publications/hmrc-digital-disclosure-service.
The process:
- Notify HMRC of your intention to disclose — you have 90 days to complete the disclosure after notifying
- Calculate the tax owed — for each year, work out the correct tax, interest, and any penalties
- Submit the disclosure — including a full explanation of why the underpayment occurred
- Pay — HMRC will confirm the agreed amount; payment is expected within 90 days of the disclosure being accepted
How to Calculate What You Owe
For each tax year in scope (HMRC can typically go back up to 20 years for serious or deliberate errors, 4 years for innocent errors, and 6 years for careless errors):
- Work out the correct taxable income or gain that should have been declared
- Calculate the tax due at the correct rate for that year
- Deduct any tax already paid
- Add interest — HMRC charges late payment interest from the original payment due date. The rate in 2026/27 is Bank of England base rate + 2.5% on underpaid tax
- Calculate penalties — using HMRC’s penalty ranges for unprompted disclosure
Example: Sarah failed to declare £8,000 rental income per year for three years (2022/23 to 2024/25) — a careless error.
| Year | Undeclared income | Tax owed (20%) | Interest (approx.) | Penalty (0–30%) |
|---|---|---|---|---|
| 2022/23 | £8,000 | £1,600 | £240 | £0–£480 |
| 2023/24 | £8,000 | £1,600 | £160 | £0–£480 |
| 2024/25 | £8,000 | £1,600 | £80 | £0–£480 |
| Total | £24,000 | £4,800 | ~£480 | £0–£1,440 |
With a voluntary disclosure and full cooperation, HMRC would likely agree a penalty at the lower end (0–10%), bringing Sarah’s total bill to approximately £5,400–£5,800 including interest.
HMRC Disclosure Campaigns Currently Open
Let Property Campaign — for landlords with undeclared UK rental income. Available at gov.uk/guidance/let-property-campaign. You notify online and complete the disclosure within 90 days.
Worldwide Disclosure Facility — for offshore income, assets, or gains. Available at gov.uk/guidance/worldwide-disclosure-facility-make-a-disclosure. Requires disclosure of all undeclared offshore matters.
Both campaigns offer structured processes with HMRC guidance on calculating the amounts due.
How Far Back Can HMRC Go?
| Error type | How far back HMRC can assess |
|---|---|
| Innocent / no fault | 4 years |
| Careless | 6 years |
| Deliberate | 20 years |
| Offshore matters | 12–20 years depending on territory |
Making a voluntary disclosure before HMRC raises an assessment preserves the shorter time limits where they apply.
What Happens If HMRC Contacts You First
If HMRC writes to you about a discrepancy or opens a compliance check before you disclose, you have moved from unprompted to prompted territory. You should still cooperate fully and make a prompt, complete disclosure — penalties will be higher, but cooperation and quality of disclosure still reduce them. Do not delay or provide incomplete information; HMRC treats delay and obstruction as aggravating factors.
See our Self Assessment guide, Section 24 landlord tax guide, and income tax guide.