Autumn Budget 2026: Budget 2026 brings greater HMRC scrutiny and stronger information powers

Businesses and individuals can expect greater scrutiny from HMRC following Budget 2026, with the Government investing in additional compliance officers and strengthening HMRC's information-gathering capabilities.

While the focus is on tackling non-compliance and ensuring the correct amount of tax is paid, the changes have wider implications. Good record keeping, robust tax governance and the ability to explain how tax positions have been reached are likely to become increasingly important.

What do more HMRC compliance officers mean for businesses and individuals?

The Government has announced funding for an additional 670 HMRC compliance officers by 2029-30, on top of an existing commitment to recruit 5,500. This will strengthen HMRC's ability to tackle non-compliance and recover unpaid tax, alongside increasing use of data and technology to identify potential discrepancies.

For businesses, this makes it increasingly important that tax returns can be reconciled to underlying accounting information and that significant or unusual transactions are properly documented.

Individuals and families with more complex affairs, particularly those with trusts, overseas interests, property or multiple sources of income, should also be aware that information held by HMRC is increasingly likely to be analysed collectively.

How is HMRC targeting wealthy taxpayers?

HMRC's new approach to wealthy taxpayers illustrates this direction of travel. It currently defines its wealthy population as individuals with income exceeding £200,000 or assets exceeding £2 million in any of the previous three years. HMRC plans to combine customer, entity, third-party and open-source data, supported by advanced analytics and AI, to identify potential risks earlier.

How are HMRC's information powers changing in Budget 2026?

The Budget confirms reforms which broadens the information HMRC can request when identifying a taxpayer and, with appropriate approval, allows information notices concerning deceased taxpayers to be issued more than four years after death.

Can HMRC access your accounting software?

The changes do not give HMRC an unrestricted right to inspect every taxpayer's accounting software. However, where HMRC already has a legal entitlement to information, the modernised rules potentially enable it to obtain and understand relevant information held within digital systems.

Businesses therefore need to consider not only whether the final figure reported to HMRC is correct, but whether there is a clear audit trail demonstrating how it was produced.

Will HMRC's new powers be used proportionately?

Few would disagree that HMRC should have sufficient resources and appropriate powers to tackle deliberate tax evasion. The more difficult question is how those powers are exercised in practice.

There is an important distinction between deliberate non-compliance and a taxpayer who has made a genuine mistake or legitimately disagrees with HMRC's interpretation of the tax position. Giving HMRC additional resources to tackle deliberate non-compliance is understandable, but increased resources and modernised information powers need to be accompanied by appropriate safeguards and used proportionately. A discrepancy identified by a computer does not necessarily represent unpaid tax, particularly where legislation is complex or a transaction requires professional judgement.

Planning ahead for greater HMRC scrutiny

With greater compliance resource, better-connected information and more sophisticated technology, HMRC will be increasingly well equipped to identify and investigate potential tax and VAT discrepancies.

Taxpayers should focus on maintaining good records, ensuring significant tax positions are properly supported and retaining contemporaneous evidence of important judgements. For more complex businesses and individuals, periodically reviewing whether tax filings are consistent with information HMRC may receive from other sources will also become increasingly valuable.

Armstrong Watson is hosting a live webinar on Tuesday, 3rd November, at 9.30am. Join us to hear from our specialists in tax, financial services and accounting who will be examining the announcements and their impact.

To register for the webinar please visit https://armstrongwatson.info/47JlHMY.