HMRC’s Crackdown on Invisible Income: What You Need to Know
HMRC is turning up the heat on undeclared income. If you’re running a business or side hustle, take note.
In this blog, you’ll discover how HMRC uses advanced technology, digital reporting, and informants to uncover hidden earnings. You’ll also learn what it means for your business and how to stay compliant.
Lets break it down.
HMRC Doesn’t Need a Reason to Investigate You
HMRC can investigate any tax return, anytime. They don’t need to tell you why or offer explanations.
You could file your tax return honestly, yet still be picked for a detailed check. If you’ve under-reported or forgotten income, you’re taking a big risk. HMRC has the tools and data to find out.
Meet Connect: HMRCs Digital Detective
At the heart of HMRCs strategy sits a powerful system called Connect.
Connect scans billions of pieces of data. It links information from different sources to spot hidden income. It finds patterns and inconsistencies that would take humans weeks to detect.
Over 90% of tax investigations now start because Connect spotted something unusual.
Where Does Connect Get Its Data?
HMRC no longer relies on tips or random checks. It collects digital footprints from many public and private sources.
Here’s a snapshot of where Connect pulls its data:
- Social media accounts and activity
- Flight bookings and passenger lists
- Google Street View and location data
- Cryptocurrency transactions
- PayPal and online payments
- Tax returns and bank statements
- DVLA, Land Registry and Companies House
- The Department for Work and Pensions (DWP)
- UK Border Agency records
Connect builds a detailed picture of your lifestyle, travel, and transactions. If your spending doesn’t match your reported income, expect a red flag.
Want to know how digital accounting can help you stay on top? Explore digital accounting now.
Digital Platforms Now Share Your Sales Data
As of January 2024, digital platforms must report sellers’ income directly to HMRC.
Previously, HMRC had to request this data manually. Now, platforms must collect and submit it automatically each year.
Affected platforms include:
- Airbnb (short-term property rentals)
- Uber (private hire)
- Deliveroo (food delivery)
- eBay (online private sales)
These platforms must send an annual report to HMRC by 31 January. The first report deadline is 31 January 2025. It will cover sales from 1 January 2024 to 31 December 2024.
Occasional sellers, those making fewer than 30 sales are currently excluded. But don’t count on that lasting.
AI and Geo-Mapping Help HMRC Target Investigations
HMRC now uses artificial intelligence (AI) to take things even further.
While Connect gathers data, AI analyses it. It finds trends, detects unusual patterns, and assesses behaviour.
HMRC combines AI with geo-mapping. This maps sales, income, and demographic data to specific locations. It helps identify high-risk individuals and areas faster and more accurately.
That saves HMRC time and money. And it means more businesses will be checked.
Want to make sure your accounts match your lifestyle? Check out our Business Finance Support.
Informants Can Now Get Paid to Report You
Despite the tech tools, human tip-offs still play a role.
Disgruntled ex-partners, employees, or business partners often report undeclared income. You can report tax evasion online or by calling HMRC’s hotline.
To boost this, HMRC announced a new reward scheme in March 2025.
Heres how it works:
- Informants report serious non-compliance by companies or individuals
- HMRC investigates and recovers unpaid tax
- Informants may receive up to 25% of the recovered amount
The scheme will focus on big earners, offshore schemes, and avoidance strategies. But if it proves successful, it may expand.
Until then, HMRC will offer rewards at their discretion.
HMRC Is Targeting ‘Phoenixism’
Another focus is tackling phoenix companies. This is where directors close a company with debts and reopen a new one.
Its often used to avoid paying taxes.
HMRC now works with the Insolvency Service to stop this practice. They can demand upfront tax payments from new companies.
They’re also making more rogue directors personally responsible for company tax debts.
Why You Cant Afford to Ignore This
HMRC is watching. It has the tools, data, and now the incentives to catch invisible income.
Ignoring the rules or relying on luck could land you with:
- Penalties and interest
- Full investigations
- Backdated tax bills
- Criminal charges in serious cases
Even honest mistakes can trigger problems. If your income sources aren’t well documented, you’re exposed.
Want to know how to avoid this? Check out our Tax Services.
What You Should Do Right Now
Here’s how to stay compliant and protect yourself from HMRCs spotlight:
- Keep Detailed Records
Maintain up-to-date records of all income, no matter how small.
Track everything: freelance work, online sales, rental income, and side gigs.
Use cloud accounting tools to keep things tidy and accessible.
Need help with bookkeeping? Learn more about our support services.
- Declare All Your Income
Don’t assume HMRC won’t find out. If it touches the internet or a bank, they probably will.
Declare all income sources in your self-assessment or company accounts.
Not sure what counts as taxable? Lets chat.
- Use Professional Support
Working with a qualified accountant reduces risk and stress.
At I Hate Numbers, we support businesses across the UK. We help you understand your finances and stay fully compliant.
From digital accounting to self-assessments, we keep your records clean and HMRC-ready.
Don’t Wait Until HMRC Comes Knocking
HMRC has stepped up its game. If your income doesn’t match your lifestyle, the red flags will fly.
The message is clear: transparency isn’t optional anymore.
If you’re unsure whether your finances are watertight, lets sort that now.
Book a Free Call with I Hate Numbers Today
Get peace of mind. Get expert support. And get ahead of HMRC.
Book your free call today and let’s talk about your numbers.