The number of individuals admitting to HMRC that they have underpaid tax on offshore assets has surged by 22% in the past year. Our latest research reveals that disclosures made through HMRC's Worldwide Disclosure Facility (WDF) increased from 4,630 in 2023 to 5,643 in 2024.
This significant rise signals a growing awareness among taxpayers that undeclared offshore income is no longer a risk worth taking. As HMRC intensifies its scrutiny, those who act proactively stand to benefit the most.
Why such an increase?
There are several reasons for more people coming forward to put their tax affairs right. In addition to an increase in public awareness, HMRC are making good use of the information it receives from overseas tax authorities using the agreement known as the Common Reporting Standard (CRS). The CRS has been adopted by over 120 countries who now automatically share information about the assets and financial accounts held in its territory by individuals actually living in another country. HMRC now receives data on an annual basis from overseas tax havens such as the Cayman Islands, Bermuda and the British Virgin Islands, as well as countries closer to home such as Spain, France and Greece.
Using this flood of new information, HMRC then cross-references it with submitted tax returns using its powerful Connect database. This has led to an increasing number of so-called "nudge letters" being sent to those suspected of underreporting their foreign income, encouraging them to rectify any discrepancies before a formal investigation is instigated.
The rising risk for cryptocurrency investors
By 2027, HMRC will also begin receiving information on cryptocurrency accounts from numerous countries. Unfortunately, many taxpayers mistakenly believe that cryptocurrencies are not subject to tax in the UK, but this is far from the truth. Those who fail to declare cryptocurrency income or gains could face severe financial penalties down the line.
The consequences of non-disclosure
For those who choose to delay or ignore their UK tax obligations, the consequences can be severe. If HMRC contacts an individual before they make a voluntary disclosure, they could face penalties of at least 150% of the unpaid tax, together with interest from the date that the tax was actually due. In extreme cases, the tax penalty could rise to 300% or even criminal prosecution for deliberate tax evasion.
However, the risk of draconian tax penalties or potential prosecution can be mitigated by making a voluntary disclosure to HMRC using its online WDF portal. Such an approach will always result in lower tax penalties being charged. In some cases, if HMRC accept that a taxpayer had a reasonable excuse or took reasonable care, no penalty may be charged at all. The WDF process provides a structured and efficient way for taxpayers to correct past mistakes, while limiting the risk of further HMRC action.
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