The tax system can seem complicated, but as long as you know which taxes you need to pay and when you need to pay them, it’s really quite simple. In the UK, paying tax is a legal obligation. Because of this, failure to pay what you owe or deliberately avoiding your tax commitments can lead to serious consequences.
However, while some forms of tax evasion can result in fines or penalties, certain situations can lead to criminal prosecution and, in some cases, imprisonment.
Who needs to pay tax in the UK?
In England, Scotland, Wales, and Northern Ireland, everyone is legally required to pay tax – it’s the law. The only people who don’t need to pay tax are those who earn less than the income tax threshold for the tax year (£12,570 for 2025/26).
However, the rules are slightly different depending on your employment and residency status.
For example, if you work for a company, tax will be automatically deducted from your payslip by your employer via Pay As You Earn (PAYE). If you work for yourself, you’ll be responsible for paying tax through self-assessment.
UK residents are taxed on their global earnings, while non-residents only pay tax on what they earn in the UK. If you’re in the country for 183 days or more, or your only home is the UK for more than 30 days, you’ll be a resident for tax purposes.
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How does HMRC investigate income tax evasion?
HM Revenue & Customs (HMRC) has the right to investigate your tax affairs at any point if they suspect you might not be paying the right amount of tax or purposely avoiding your tax obligations.
They have also been known to open tax evasion investigations at random, but this is rare. If you have been informed of an HMRC investigation being launched against you, it’s more than likely come about as a result of something you have – or have not – done.
The first sign that they might be doing this is a formal notice requesting more information. This could refer to a specific element of a tax return you filed or multiple instances of an activity they deem suspicious or fraudulent.
It’s crucial that you respond to any communication from HMRC as soon as possible and with as much information as you can. If you fail to respond or provide an acceptable response, a case might be opened in your name so your behaviour can be thoroughly investigated.
An HMRC investigation usually involves them looking into various documents that might give them an insight into your lifestyle and financial habits, such as bank statements, social media posts, PAYE records, and employment contracts.
In some cases, you’ll be invited to attend an interview with HMRC officers. If this happens, it’s recommended to attend with legal representation.
For HMRC to find an individual guilty of tax evasion, they must be able to prove with reasonable evidence that that person knowingly omitted information in an attempt to avoid or reduce their tax payments. They might also carry out an evidential test to determine the scale of the evasion and which action should be taken.
Can HMRC initiate County Court proceedings against me for unpaid tax?
There are many tax evasion penalties imposed by HMRC. Sometimes, they will seek to recover the unpaid tax through County Court proceedings.
When HMRC investigates tax evasion, they might apply for a charging order, which is a court order that secures an unsecured debt to your home or other assets. If you decide to sell your home with a charging order, the debt must be settled with the proceeds of the sale before you receive any remaining money. However, to date, HMRC has only ever forced the sale of a property when the taxpayer had multiple properties or had been involved in criminal activity.
HMRC might serve you with a third-party debt order, which is when an amount equal to the amount you owe is frozen and withdrawn from your bank account, building society account, or Individual Savings Account (ISA). The purpose of this is to stop you from spending money that could go towards repaying your debt.
It’s also worth noting that, under the Criminal Finance Act (2017), if you facilitate tax evasion while working on behalf of a company, both you and the business in question could be held criminally liable. This can have a knock-on effect on other areas of your life and lead to further legal fees and reputational damage.
However, if your outstanding income tax debt is less than £2,000 in total, HMRC might use the magistrates’ court instead of the county court.
How much debt do you have?
Why do some people not pay tax?
There are many reasons why people don’t pay tax or pay less tax than they know they should be paying after tax relief and allowance (known as tax liability).
For example, some people avoid paying tax because they don’t want to, they don’t know how to, they forgot, their accountant failed to do so on their behalf, or they didn’t know they had to in the first place.
However, it’s important to note that tax evasion is not the same as tax avoidance, which is utilising all means possible to legally lower your tax obligations. In any case, purposely not paying tax you know you owe is illegal.
Even if you think you’ve gotten away with it, HMRC can catch up with you years later and take further action against you for tax owed. According to the Limitation Act (1980), there is no time limit for HMRC to pursue a tax debt once an investigation has been launched.
Generally, HMRC tend to investigate cases where an honest mistake has been made for four years, carelessness for six years, offshore matters for 12 years, and deliberate tax evasion for as long as 20 years.
Can you go to jail for not paying taxes (UK)?
One of the most common concerns among those who don’t pay tax for whatever reason is whether they could be prosecuted for income tax evasion. However, the answer isn’t quite as straightforward as ‘yes’ or ‘no’ as the penalties for tax evasion differ depending on the nature of the offence.
While there are documented cases of people being sent to prison for unpaid tax equaling tens of thousands over several years, it’s still relatively unheard of, and you’ll likely just face fines. Nevertheless, it’s always a possibility if you’re found guilty of tax evasion.
The length of the prison sentence generally matches the severity of the offence. For example, you might receive a maximum sentence of six months for a minor offence or for providing false documentation, up to seven years and unlimited fines for serious fraud, and up to 10 years for large-scale tax fraud.
However, if the evidence shows that you’re guilty of hiding money in offshore accounts or serious tax evasion (sometimes referred to as cheating HMRC or cheating the public revenue), you risk criminal charges and potentially a life sentence.
If you’ve made a genuine mistake, it’s important to let HMRC know as soon as you realise. They’ll probably still open an investigation into your case to determine what happens next, but if you’re able to prove it was an innocent error, it’s unlikely that you’ll face serious consequences.
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Is income tax a priority debt?
Yes, income tax is considered a priority debt, which means that HMRC can take serious action against you if you don’t pay. This might include forcibly deducting the money from your wages (with an attachment of earnings order or summary warrant) or sending enforcement agents to your home (with enforcement action) to remove and sell assets to cover debts.
However, if HMRC take any of these actions, there are strict rules they must follow. For example, with an attachment of earnings order or summary warrant, you must always be left with enough money to cover your essential expenses. Similarly, if a HMRC officer takes direct recovery action and visits you at home, they must treat you with respect and can’t seize items you need to maintain a reasonable standard of living.
HMRC should also give you an opportunity to repay any money you owe before they initiate legal action against you. This might involve negotiating a payment plan where you make regular deductions towards your outstanding balance until the debt is repaid.
If you have multiple debts, it’s always recommended to deal with your priority debts first. It’s not wise to ignore your non-priority debts altogether, but you’re less likely to be contacted about repayment of the debt, and legal action generally won’t occur as quickly.
Examples of other priority debts include council tax arrears, child maintenance payments, court fines, and utility arrears.
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Conclusion
In the UK, not paying tax is a criminal offence. This means that if HMRC suspects you’re not paying the right amount of tax or not paying any tax at all, they will launch an investigation into your conduct and possibly commence legal action against you.
The maximum prison sentence for cheating HMRC is a life sentence, but this level of legal action is rarely taken for cases of tax debt. Instead, HMRC will likely initiate County Court proceedings against you to force repayment of the debt.
Income tax is a priority debt, which means HMRC will take swift and serious action against you to get you to pay what you owe. Because of this, it’s recommended to deal with the problem as soon as possible if you realise you’ve made a genuine mistake.
