HMRC is pursuing up to 700,000 individuals linked to tax avoidance schemes, according to figures reported by the Credit Protection Association. It’s the biggest HMRC tax avoidance crackdown 2026 has seen — and a new whistleblower reward scheme is adding fuel to the drive.
Key figures at a glance:
- Up to ~700,000 individuals reportedly being pursued by HMRC over involvement in tax avoidance schemes
- The Strengthened Reward Scheme pays informants 15% to 30% of tax recovered where at least £1.5 million is collected
- Tax avoidance accounted for an estimated £1.8 billion of the UK tax gap, according to the Chartered Institute of Taxation
- From 6 April 2026, recruitment agencies and end clients face joint and several liability for unpaid PAYE in umbrella company supply chains
- Penalties in the most serious offshore avoidance cases can reach up to 200% of unpaid tax
What is driving the HMRC tax avoidance crackdown
This enforcement push has been years in the making. HMRC’s published estimates put the tax gap at around £39.8 billion for the 2022 to 2023 tax year — roughly 4.8% of total theoretical liability. Of that, tax avoidance through contrived but technically legal schemes accounted for an estimated £1.8 billion, according to the Chartered Institute of Taxation.
But many of those now being contacted are not the people most taxpayers picture when they hear “tax avoidance.”
A significant proportion are ordinary PAYE workers who were placed into disguised remuneration schemes through umbrella companies or agency arrangements, often without fully understanding what they’d been signed up to.
HMRC has reportedly invested in AI-driven compliance tools to spot avoidance patterns, and it’s expanding its enforcement powers from April 2026 with stepped late payment penalties and increased staffing.
What the new whistleblower scheme means
At Autumn Budget 2025, HMRC launched the Strengthened Reward Scheme, modelled on the US IRS whistleblower programme.
Informants can now receive between 15% and 30% of the tax HMRC collects on the back of their tip-off, with penalties and interest excluded from the calculation.
There’s a threshold. Rewards only kick in where the information leads to recovery of at least £1.5 million in tax, and the scheme targets serious non-compliance: large corporates, wealthy individuals, complex offshore structures, and organised avoidance arrangements.
Awards remain discretionary, confidential, and informants can report online via GOV.UK.
The previous HMRC informant reward UK system paid modest fixed amounts, with little transparency around who qualified or how payments were calculated.
The new Strengthened Reward Scheme HMRC has introduced represents a sharp cultural shift — away from the longstanding view that wrongdoing should be reported out of civic duty alone, and towards a US-style financial incentive model.
Disguised remuneration and the umbrella rules
A large share of those caught up in this enforcement push are linked to one type of scheme in particular: disguised remuneration.
These arrangements typically pay workers a small salary through PAYE, topped up with a larger ‘loan’ that’s not intended to be repaid — designed to sidestep Income Tax and National Insurance.
The 2019 Loan Charge was brought in to tackle outstanding disguised remuneration loans made between 9 December 2010 and 5 April 2019, and roughly 50,000 individuals were affected by the original charge.
Finance Act 2026 now introduces a new HMRC settlement opportunity 2026 for those still carrying Loan Charge liabilities, following the McCann review.
Under the new terms, settlement amounts are worked out using the tax rates from the years loans were actually made — not the rates that applied to the Loan Charge in 2019.
HMRC’s technical note confirms that late payment interest is written off, and each taxpayer gets a flat £5,000 reduction capped at £70,000.
Promoters of avoidance schemes can’t access these terms. The settlement opportunity takes effect from Royal Assent of Finance Act 2026.
There’s also a major change to the umbrella company market from 6 April 2026. New joint and several liability rules mean that recruitment agencies — and in some cases end clients — can be held liable for unpaid PAYE and Class 1 NICs where an umbrella company in the supply chain fails to operate payroll correctly.
According to the GOV.UK Tax Information and Impact Note, approximately 30,000 agencies, 400 umbrella companies, and ~700,000 workers fall within scope.
Penalties for those caught in avoidance schemes
The financial consequences can be severe.
In cases involving deliberate concealment, HMRC can go back up to 20 years of historical income or gains. For UK-only avoidance, penalties typically range from 30% of the tax due for careless behaviour up to 100% where conduct is deliberate and concealed.
Offshore cases are treated more harshly still — penalties can reach up to 200% of unpaid tax, according to GOV.UK’s published penalty guidance.
Late payment interest currently sits at 8% per year (Bank of England base rate plus 4%), and stepped penalties apply on top: 3% at day 15, another 3% at day 30, then 10% per year after day 31.
Scheme promoters and enablers face their own sanctions too, including fines per scheme user for failing to disclose avoidance schemes and daily penalties for late submissions.
HMRC’s Contractual Disclosure Facility (Code of Practice 9) and the Worldwide Disclosure Facility for offshore matters remain open as voluntary disclosure routes.
Coming forward unprompted can bring penalty rates down to as low as 0% in non-deliberate cases — a significant incentive to act before HMRC comes knocking.
What to do if you receive an HMRC letter
HMRC has sent out tens of thousands of nudge letters, formal enquiry letters, accelerated payment notices, and follower notices in recent years.
If one lands on your doormat, don’t ignore it — even if you believe the scheme was legitimate or that you were misled into it.
Meredith McCammond, Technical Officer at the Low Incomes Tax Reform Group (LITRG), has spoken publicly about the problem.
Writing for ContractorUK, she said: “We have been urging HMRC to recognise that some workers are unaware they are in a disguised remuneration scheme.”
That’s the reality for many: no avoidance motive, no understanding of how their pay was structured, and now an HMRC enforcement letter on the kitchen table.
Steps to take now
- Verify the letter is genuine by logging into your Personal Tax Account on GOV.UK — HMRC letters arrive by post only, not by email or text
- Note the deadline — formal enquiries under Section 9A TMA 1970 typically require a response within 30 days
- Gather all relevant records: contracts, payslips, and any communications about your pay arrangement
- Seek guidance — free initial support is available from LITRG, TaxAid, and the Loan Charge Action Group
- Check whether the new settlement opportunity applies to your circumstances, particularly if you have outstanding Loan Charge liabilities
- Keep copies of all HMRC correspondence — loss carry-forward rules and a four-year reporting window for overpayment claims may be relevant later
Could you be owed a tax rebate?
Not everyone contacted by HMRC owes more tax. Workers caught up in disguised remuneration may have overpaid in other areas — particularly where PAYE coding was wrong or legitimate expenses went unclaimed.
A job change, an incorrect tax code, or pension income that’s been taxed twice can all create an overpayment that HMRC itself may not flag.
If you’re not sure where you stand, Tax Rebate Services can help you verify whether an HMRC notice is genuine and work out what to do next.
Key Takeaways
- HMRC is reportedly pursuing up to 700,000 individuals over tax avoidance, many of them ordinary workers caught up in disguised remuneration through umbrella companies.
- The Strengthened Reward Scheme pays whistleblowers 15% to 30% of the tax HMRC recovers where their tip-off leads to at least £1.5 million being collected.
- From 6 April 2026, recruitment agencies and end clients can be held responsible for unpaid PAYE in umbrella company supply chains under new joint and several liability rules.
- Penalties range from 30% to 200% of unpaid tax, and HMRC can go back 20 years in deliberate concealment cases.
- If you receive an HMRC enforcement letter, verify it’s genuine, respond within the deadline, and get advice — particularly if the Finance Act 2026 settlement opportunity may apply.
