Latest HMRC nudge campaigns

HMRC continues its rather ‘scattergun’ approach to tax compliance checks. One arm of this approach is to issue a wide range of what they call One To Many or commonly known as “nudge “letters. These are sent to taxpayers where HMRC feel that, based on the information they hold, there may have been omissions within the tax returns filed.

What is an HMRC nudge letter?

A nudge letter is issued when HMRC holds third party information which indicates there has been an omission from the filed tax return. It may also suggest that a return should have been filed but has not.

The process is based on a simple data clashing exercise, between third party data HMRC receives and the entries made within a tax return. This third party data could be an account held with a financial institution abroad. If this clashing exercise flags up a mismatch or omission, then a nudge letter is issued to the taxpayer.

Does receiving an HMRC nudge letter mean you’ve made a mistake?

Although there is nothing random to being selected for such action, receipt of a nudge letter does not guarantee there has been an omission leading to underpaid tax. It is important to consider the content of the nudge letter and establish whether the filing position is correct.

Third party data can often be incomplete or misleading and HMRC rightly have to make some assumptions. While it is possible that a filing requirement has been missed, it is also possible that everything is in order. HMRC’s information at hand could be incorrect or relates to say accounts held in another capacity such as that of a trustee.

Recent HMRC nudge campaigns

Nudge letters form part of a ‘campaign’ where HMRC will issue letters to all taxpayers that satisfy certain parameters or conditions. Every year brings a fresh series of campaigns and this year has been no different. Below are some of the more recent nudge letter campaigns:

• R&D claims (July 2026) – directed at companies claiming R&D where HMRC view the company’s trading activity (based on their SIC code) is not conducive to relievable R&D being undertaken
• Provisional Figures/Estimates/Round Sums (February 2026) – directed at self-assessment taxpayers who have estimated, provisional, or round sum figures in their 2024/25 returns to encourage amendment or finalisation of the provisional return
• High Turnover / VAT Thresholds (October 2025) – directed at companies whose turnover exceeded £90,000 to verify VAT-able turnover status
• Property Income (September 2025) – The existing HMRC Let Property Campaign recently beefed up to include HMRC cross-referencing tenancy deposit schemes and letting data to identify anomalies
• Associated companies (August 2025) – directed at companies that HMRC have identified as having not declared associated companies in their corporation tax returns and thus having potentially claimed higher marginal rate relief than they are entitled to.

Campaign spotlight – National minimum wage nudge letters

HMRC is also increasing its focus on National Minimum Wage (NMW) compliance, with many employers receiving nudge letters encouraging them to review their pay practices.

These letters are not formal investigations, but they are often an indication that HMRC has identified potential risk areas within a sector or region. Employers can find themselves breaching the NMW rules even where they believe they are paying above the minimum rates.

Common areas of concern

Common issues include salary sacrifice arrangements, deductions for uniforms or equipment, unpaid working time, travel between assignments, apprentice pay errors and incorrect salaried hours calculations. In many cases, non-compliance arises from payroll processes or record-keeping rather than deliberate action.

Where underpayments are identified, employers may be required to repay arrears to current and former employees, recalculate those arrears using current NMW rates, pay additional employer National Insurance contributions and potentially face significant penalties. There is also the risk of being publicly named by the government alongside the resulting reputational impact.

What should employers do

If you receive an NMW nudge letter, it is advisable to review working time records, payroll calculations, deductions and arrangements affecting employees paid at or near the minimum wage. Taking action early is often less costly than dealing with a full HMRC compliance review, which can look back over the previous six tax years.

If you’ve received an NMW nudge letter, or would like reassurance that your NMW processes are compliant, our Employment Tax team can help. We can review your payroll processes, assess potential areas of risk and support you in responding to HMRC enquiries.

Responding to an HMRC nudge letter

Nudge letters typically warn the recipient that taking no action will likely result in an enquiry. Effectively HMRC are saying ‘fess up now or we will start digging around’. HMRC usually give a deadline of 30 days to respond. You can respond either via a lodging an intention to disclose, or informing HMRC there is nothing to declare.

If you receive a nudge letter, you should:

• Check whether there is a potential omission or underpayment. Is the nudge letter right and do you need to make a disclosure? Is there a legitimate reason that whatever HMRC have identified does not actually need to be declared on your tax return?
• Check whether you can meet the stated deadline. Failure to act in time can result in assessments being issued or enquiries opened. Extensions can be arranged by calling the correct helpline or the officer directly.

If a disclosure is required, it is important that you only disclose those years which HMRC are legally entitled to. You should also ensure that the penalty loadings you advance are appropriate to the behaviour which gave rise to the underpayment.

If you are unsure over what you need to do or say to HMRC then best advice is to engage with tax dispute resolution experts.