Glossary · UK
What is HMRC Nudge Letter?
A letter sent by HMRC to taxpayers identified by its Connect data-matching system as potentially having undeclared income or errors in their tax returns.
Full Definition
HMRC sends nudge letters (also called compliance letters or one-to-many letters) to large groups of taxpayers identified through its HMRC Connect data-matching system. Connect cross-references data from banks, Land Registry, DVLA, Companies House, online platforms (DAC7), PayPal, foreign tax authorities and benefits agencies. Common triggers include: undeclared rental income, foreign income not shown on Self Assessment, online marketplace income above the trading allowance, large share sales not reported for CGT, company car benefits not matching P11D data. Nudge letters are not formal investigations. Responding with a voluntary disclosure typically attracts a lower penalty rate (as low as 0% for unprompted disclosure of a genuine error). Ignoring a nudge letter increases the risk of a formal compliance check. A taxpayer who has received a nudge letter and believes they have made an error should review their position, take professional advice if appropriate, and make a disclosure via HMRCs voluntary disclosure facilities (let property campaign, worldwide disclosure facility, digital disclosure service). The penalty regime grades from 0% (unprompted, reasonable care) to 100% (deliberate and concealed).