Last updated: 16 October 2026
HMRC knows more than you think
HMRC collects huge amounts of data from third parties and uses its Connect system to match it against tax returns. If your return does not match what HMRC already knows, you may receive a “nudge” letter or a formal enquiry. Understanding where the data comes from helps you keep your records right.
Main sources of HMRC information
| Source | What HMRC receives |
| Banks and building societies | Interest paid, and data on accounts linked to businesses |
| Overseas tax authorities | Account balances and income under the Common Reporting Standard, from more than 100 countries |
| Digital platforms | Sales data from online marketplaces, gig and letting platforms since 2024 |
| Crypto exchanges | User and transaction data under the Cryptoasset Reporting Framework from 1 January 2026 |
| Land Registry and letting agents | Property ownership, purchases and rental income |
| Employers and pension providers | Pay and tax through Real Time Information |
| Companies House | Directors, shareholdings and accounts |
| Merchant acquirers | Card payment takings for businesses |
| DVLA and other bodies | Vehicle ownership and licence data |
Digital platform reporting
Online platforms such as marketplaces, accommodation sites and ride-hailing apps must report details of sellers who make 30 or more sales or receive about £1,700 (€2,000) or more in a calendar year. The first reports covered 2024. Many people who sell regularly online have since received letters from HMRC.
Crypto data
From 1 January 2026, UK crypto service providers must collect user details and transaction data, with the first reports to HMRC due by 31 May 2027. HMRC also already receives data from some exchanges under information powers.
Other sources
- Tip-offs from the public, ex-partners or employees
- Social media and websites
- Its own analysts, including specialist offshore teams
- Information from enquiries into other taxpayers
What happens if HMRC finds a mismatch?
HMRC often sends a nudge letter first, asking you to check your return and correct any mistakes. Ignoring it can lead to a formal enquiry and higher penalties. A voluntary disclosure before HMRC opens an enquiry attracts the lowest penalties.
Worked example
Raj sells vintage clothing online and made 120 sales in 2025 but never declared the income. The platform reported his sales to HMRC. He receives a nudge letter. By making a voluntary disclosure, his penalty for a careless error could be as low as 0% of the tax due if unprompted, compared with up to 30% if HMRC had to find it.
How to protect yourself
Keep business and personal bank accounts separate, record all income including cash and online sales, and keep receipts for expenses. If you receive a letter from HMRC, read it carefully, check the figures against your records and reply by the deadline, taking advice if you are unsure what it means.
Frequently asked questions
How far back can HMRC go?
Four years for innocent errors, six for careless and up to 20 for deliberate behaviour.
Does the trading allowance help?
Yes. Income up to £1,000 from trading is tax free.
Does HMRC see my bank statements?
Not routinely, but it can request them during an enquiry.
Should I wait for HMRC to contact me?
No. Disclosing first reduces penalties.
Related: what to do if HMRC asks about money held overseas, new guidance on digital platforms and how to disclose undeclared rental income.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with HMRC enquiries and disclosures. See our tax accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
