What happens if HMRC reopens a closed tax year?

What it means when HMRC “reopens” a closed tax year

Most people assume that once a UK tax year has ended and their tax return (if they file one) has been submitted, the year is “done” and can’t be revisited. In everyday conversation, you might hear someone say a year is “closed” when their Self Assessment is processed, their PAYE position looks settled, or they’ve received a tax calculation showing a refund or a balance due. In reality, HM Revenue & Customs (HMRC) can, in certain circumstances, go back to earlier years to check whether the right amount of tax was paid and, if not, to correct it.

When people say “HMRC reopened a closed tax year,” they’re usually describing one of three things:

1) HMRC opened an enquiry into a filed Self Assessment return for a past year.

2) HMRC issued a discovery assessment (or similar) because they believe tax was underpaid in a year that they can no longer open by normal enquiry.

3) HMRC corrected PAYE records for a past year, often following late information from an employer, pension provider, or benefits administrator.

Each route has different rules, time limits, and practical consequences. Understanding which one applies is important, because the steps you take, the documents you gather, and the deadlines you must meet can differ significantly.

Why a tax year can feel “closed” even when it isn’t legally final

For many taxpayers, the sense of closure comes from a moment: you submitted your return, your accountant said it was all sorted, you paid what HMRC asked for, or you received a calculation. For PAYE taxpayers, it might be a P800 tax calculation or a letter saying you’ve paid the right tax. These are helpful milestones, but they don’t always mean the year is legally beyond review.

HMRC operates on a system where information arrives from multiple sources. Employers submit payroll data. Banks and building societies provide interest figures. Pension providers report payments. The Department for Work and Pensions can provide state pension and benefit details. Sometimes this information arrives late or is corrected after the year ends. Sometimes HMRC’s systems match data incorrectly or not at all. And sometimes HMRC identifies risk indicators that suggest a return might be incomplete or inaccurate. These realities are why past years can resurface.

What matters in practice is not whether the year feels closed, but whether HMRC still has the power to check, enquire, correct, or assess. That power depends on the nature of the issue and how far back the year is.

The main ways HMRC can revisit a past year

1) Opening a Self Assessment enquiry

If you file a Self Assessment tax return, HMRC can open an enquiry into that return. An enquiry is a formal process where HMRC requests information, documents, and explanations to check whether the return is correct. It can cover the whole return or focus on specific areas, such as self-employment income, rental profits, capital gains, foreign income, or relief claims.

An enquiry is not automatically an accusation of wrongdoing. HMRC opens enquiries for many reasons, including random checks, risk-based selections, or mismatches between the return and third-party data. That said, the experience can be stressful because it requires time, organisation, and sometimes professional support.

If HMRC opens an enquiry, they’ll usually write to you (or your agent) explaining that an enquiry has started and what they want to look at. They may ask for records such as invoices, bank statements, contracts, mileage logs, dividend vouchers, rental statements, or evidence supporting expenses and reliefs. The enquiry can take months and, in complex cases, longer.

2) Making a correction or amendment without a full enquiry

HMRC has limited powers to correct obvious errors or omissions on a return, and taxpayers also have the ability to amend their own returns within certain time windows. Sometimes what looks like a “reopened” year is actually HMRC applying a correction based on information they already hold, or the taxpayer realising an error and amending the return.

For example, you might notice you forgot to include a small amount of bank interest or you entered a figure in the wrong box. If you correct it in time, it may simply adjust the tax due. If HMRC corrects it, you’ll normally receive a notice explaining the change.

Even if no enquiry is opened, you should still take such notices seriously. A seemingly small correction can sometimes trigger further questions if it reveals a pattern or a larger issue.

3) Issuing a “discovery” assessment

A discovery assessment is one of the most common explanations behind the phrase “HMRC reopened a closed tax year.” It refers to HMRC making an assessment for underpaid tax after the normal window for opening an enquiry has passed, where HMRC believes they have “discovered” that tax has been under-assessed or that relief has been over-claimed.

Discovery assessments are most often associated with Self Assessment, but the practical point is this: if HMRC thinks there was a tax loss and the legal conditions are met, they may be able to assess additional tax for past years even when those years were previously treated as settled.

Because discovery powers can reach further back than ordinary enquiries, they are often used for issues that HMRC identifies later—perhaps through compliance campaigns, data matching, or information received from third parties. Examples might include undeclared income, incorrect expense claims, unreported capital gains, or misunderstandings about taxable benefits.

4) PAYE reconciliations and adjustments for employees and pensioners

If you are taxed through PAYE, your tax is normally collected in real time through your salary or pension. But PAYE is not always perfect. The system depends on accurate and timely information: correct tax codes, correct payroll reporting, and correct details about benefits, expenses, or multiple employments.

HMRC can revisit PAYE years through reconciliations. A reconciliation is when HMRC compares what tax was collected through PAYE to what should have been collected, based on actual income and allowances for that year. If there’s a difference, HMRC may issue a calculation and seek to collect the underpayment, or issue a refund.

Sometimes the adjustment is straightforward: a benefit in kind was reported late, a second job used the wrong code, or taxable interest pushed you into a different band. In other cases, it can be confusing and feel like HMRC has “reopened” a year that was long finished.

Common triggers: why HMRC might revisit a past year

Understanding triggers helps you assess whether the issue is likely to be a simple correction or something more serious.

Third-party information arriving late

HMRC relies heavily on third-party reporting. If your employer corrects payroll submissions, if a pension provider updates figures, or if a bank revises interest data, HMRC may update your record. That update can change the tax due for a past year, especially where you had multiple income sources.

Mismatches between records and what you reported

In Self Assessment, HMRC compares your return with information they hold. If your return omits a source of income that appears elsewhere, it can prompt questions. The mismatch could be innocent: you thought income was taxed at source, you used estimates that were later corrected, or you misunderstood what was taxable. But a mismatch is still a trigger.

Claims for reliefs that stand out

Some reliefs and deductions are legitimate but commonly misclaimed. Examples include large expense claims compared to turnover, unusual use of allowances, or relief claims that don’t match HMRC’s typical data. HMRC may ask for evidence that the relief is due.

Compliance projects and targeted checks

HMRC periodically runs compliance campaigns focusing on certain areas, such as the gig economy, property income, offshore matters, or particular avoidance schemes. If your return or record fits the profile, a past year may be reviewed as part of a wider initiative.

Reports, tips, or information from other investigations

Sometimes HMRC receives information from whistleblowers, other government departments, or investigations into a business that reveals issues affecting individuals. Even if you were unaware, such information can lead to HMRC revisiting earlier years.

How far back can HMRC go?

The time limits are one of the most important parts of any “reopened year” situation. They determine whether HMRC is acting within its powers and what your options might be.

In broad terms, how far back HMRC can go depends on:

• Whether you filed a return and whether it was accurate.

• Whether HMRC is opening an enquiry in time, or using another power such as discovery.

• The behaviour HMRC alleges: innocent error, carelessness, or deliberate concealment.

• In some contexts, whether the matter involves offshore elements, which can have different rules and longer reach in certain cases.

Time limits can be complex, especially if there are multiple issues across different taxes. If you’re facing a significant assessment for older years, it is sensible to confirm the exact basis HMRC is using and whether the statutory conditions are met.

What HMRC will typically ask for when revisiting a year

Whether it’s an enquiry, a discovery assessment challenge, or a PAYE correction, the practical next step is often the same: HMRC wants clarity and evidence. The type of evidence depends on the issue.

Income evidence

HMRC may ask for bank statements, payslips, P60s, P45s, dividend statements, interest certificates, rental statements, client invoices, payment processor reports, or bookkeeping records. The goal is to confirm what you received and when.

Expense and deduction evidence

If expenses are in question, HMRC may request receipts, invoices, mileage logs, travel details, home office calculations, and explanations of business purpose. For some expenses, a short narrative can be as important as the receipt, because the tax question is often “was this wholly and exclusively for business?”

Capital gains and asset records

For capital gains, HMRC may ask for purchase and sale contracts, completion statements, share transaction reports, and evidence of acquisition costs and enhancement expenditure. They may also ask how you calculated the gain and what reliefs you claimed.

Relief claims and allowances

For reliefs such as pension contributions, gift aid, EIS/SEIS, or trading losses, HMRC may want certificates, contribution confirmations, and computations showing how relief was applied. If the relief affects multiple years, the request can expand quickly.

The emotional reality: why this feels so disruptive

Even when HMRC is acting lawfully, reopening an earlier year can feel unfair. Many people no longer have easy access to records. Small businesses may have changed accounting systems. People move house, change jobs, or lose paperwork. You might feel as though you’re being punished for not having perfect archives indefinitely.

This is why record-keeping matters. But it’s also why your response should be practical and calm: focus on reconstructing the facts, gathering what you can, and communicating clearly. HMRC’s view of your behaviour can be influenced by how cooperative and organised you are, even when the underlying mistake was unintentional.

What happens next: the typical process once HMRC revisits a year

Step 1: You receive a letter or notice

For an enquiry, you’ll receive a formal notice that an enquiry has been opened, often with initial questions. For a PAYE adjustment, you might receive a calculation showing an underpayment or refund. For a discovery assessment, you may receive an assessment notice and an explanation of what HMRC believes is wrong.

Step 2: Deadlines start running

Many people make the mistake of treating HMRC letters as something to deal with “when things calm down.” But tax correspondence is deadline-driven. Some notices have strict time limits for responding, appealing, or providing information. Missing a deadline can reduce your options and increase costs through penalties or interest.

Step 3: HMRC requests information and you respond

In an enquiry, HMRC’s questions may come in stages. You reply, HMRC reviews, and then follows up. In other cases, you may want to proactively provide a well-organised pack of documents and a clear explanation, because that can shorten the process and reduce misunderstandings.

Step 4: HMRC reaches a conclusion

At the end of an enquiry, HMRC will either accept your return as filed or propose amendments. With PAYE, HMRC may confirm the calculation or revise it. With a discovery assessment, the dispute may focus on whether HMRC’s discovery conditions are met and whether the tax calculation itself is correct.

Step 5: Settlement, appeal, or further dispute resolution

If you agree with HMRC’s conclusion, the matter is settled by paying any tax due (or receiving any refund). If you disagree, you may be able to appeal. The appeals process can include internal review, alternative dispute resolution in some cases, and ultimately a tribunal route if the dispute is not resolved.

Interest, penalties, and why “behaviour” matters

When HMRC revisits a year and determines tax was underpaid, two additional financial elements often appear: interest and penalties.

Interest

Interest is generally charged on late-paid tax, calculated from the date the tax should have been paid. Even if the underlying mistake was innocent, interest can apply because it is intended to compensate the Exchequer for the time value of money. From a taxpayer’s perspective, interest can feel like punishment, but in HMRC’s framework it is separate from penalties.

Penalties

Penalties are more nuanced. They often depend on why the error happened and how you behaved once you became aware of it. HMRC commonly categorises behaviour as:

• Reasonable care (no penalty if an error occurred despite reasonable care, though tax and interest may still be due).

• Careless (a penalty can apply if you failed to take reasonable care).

• Deliberate (higher penalties where HMRC believes you knowingly submitted an incorrect return or withheld information).

• Deliberate and concealed (the highest levels, where active steps were taken to hide the truth).

In practice, the distinction between “careless” and “reasonable care” can be contested. What’s reasonable depends on circumstances: complexity of affairs, your knowledge, whether you used an accountant, whether you kept records, and whether you checked your return before submission.

Even where a penalty is in point, it can often be reduced based on the quality of your disclosure: how quickly you tell HMRC, how complete your explanation is, and how helpful you are in providing documents and answering questions. This is one reason why early, organised engagement matters.

Your rights and options when HMRC revisits a year

It can feel as though HMRC has all the power, but you do have rights and procedural protections. The details depend on the type of action HMRC is taking.

Understanding the basis of HMRC’s action

Start by identifying what HMRC has done. Is it an enquiry notice? A PAYE calculation? A formal assessment? A request for information under specific powers? The document type usually determines the rules that apply, including your response options and deadlines.

Requesting clarity

If HMRC’s letter is vague, you can request clarification. For example, if they allege underdeclared income, ask what source they are referring to and what figures they hold. If they challenge expenses, ask what aspect of the claim concerns them. Clear framing can prevent you from sending irrelevant documents or missing the real point.

Appealing an assessment or amendment

Where HMRC issues an assessment or amends a return, you may have a right to appeal within a set period. An appeal is not simply a complaint; it is a legal challenge to the decision. It typically involves stating what you disagree with, why, and what you believe the correct position should be. If you are unsure, getting advice early can prevent a weak or misdirected appeal.

Alternative dispute resolution and reviews

In some disputes, you may be able to seek an internal review by HMRC or use a form of mediation-style process designed to resolve factual misunderstandings. These options are not always available or appropriate, but they can be useful when the core issue is evidence and interpretation rather than a high-level legal point.

Reasonable excuse and penalty mitigation

If penalties are charged, you may be able to argue that you had a reasonable excuse or that you took reasonable care. You can also focus on mitigation by demonstrating cooperation and transparency. Keeping a record of your communications and providing a clear timeline can help.

Practical steps to take as soon as you hear HMRC is revisiting a year

1) Don’t ignore it, and don’t panic

Ignoring HMRC letters rarely makes the problem go away. At the same time, panicking can lead to rushed responses that are inaccurate or incomplete. Treat it as a project: identify the issue, gather documents, and respond methodically.

2) Identify the tax year and the tax type

Confirm exactly which year is in question and whether it relates to Income Tax under Self Assessment, PAYE, Capital Gains Tax, National Insurance, or something else. This may sound obvious, but confusion here leads to wasted effort and incorrect assumptions about what HMRC can and can’t do.

3) Create a document pack

Gather relevant records in one place. If you can, create a folder structure by category: income, expenses, bank statements, contracts, correspondence, calculations. If records are missing, note what’s missing and why. Where possible, try to obtain duplicates (banks and providers can often supply statements for past periods).

4) Reconstruct the story

HMRC enquiries are often won or lost on clarity. Create a timeline of key events: when income was earned, when invoices were paid, when assets were bought and sold, when reliefs were claimed, and why. A short narrative that matches the documents is often more persuasive than a pile of unlabelled PDFs.

5) Be careful with admissions

Honesty is vital, but so is precision. If you know there’s an error, you can acknowledge it and propose a correction. But avoid speculative admissions like “I probably got that wrong” or “I didn’t really keep records,” especially if you’re unsure. If you don’t know, say you are checking and will revert with evidence.

6) Consider professional help where the stakes are high

For small PAYE adjustments, you may be able to handle it yourself. For significant assessments, older years, allegations of careless or deliberate behaviour, or anything involving business accounts, rental portfolios, capital gains computations, or offshore aspects, professional advice can be cost-effective. A specialist can help you frame responses, manage deadlines, and negotiate outcomes.

Examples of what “reopening” can look like in real life

A PAYE underpayment after a code issue

An employee had two part-time jobs in the same year. One job used the full personal allowance code when it should have used a basic rate code. At year-end, HMRC reconciles the position and finds an underpayment. The year felt closed because the employee was taxed every month, but the underpayment is a mechanical result of coding and multiple income sources. The fix may be a simple payment plan or an adjustment to the next year’s code to collect the shortfall.

A Self Assessment enquiry into rental expenses

A landlord claims repairs and maintenance costs that HMRC believes include capital improvements. HMRC opens an enquiry and asks for invoices and explanations. The dispute turns on whether work is a repair (generally deductible) or an improvement (generally added to the property’s base cost for capital gains purposes). The year is reopened not because HMRC wants to punish the landlord, but because the classification affects tax.

A discovery assessment for omitted dividend income

A taxpayer receives dividends from a small private company but omits them from a return, believing they were covered elsewhere. HMRC later receives data indicating the dividends were paid and issues an assessment for the earlier year. The key issues become: was the income omitted, was the omission careless or deliberate, and is HMRC within the appropriate time limits to assess? The taxpayer may need to show records and demonstrate the error was not deliberate to reduce penalties.

A late benefit-in-kind report changes the position

An employer corrects its reporting of a company car benefit after the year ends. HMRC updates the employee’s record and recalculates tax. The employee receives an unexpected notice demanding additional tax for the past year. The employee’s focus should be on confirming the benefit details with the employer, checking dates and values, and ensuring the recalculation matches what was actually provided.

What if you genuinely can’t find the records anymore?

This is common, especially when HMRC looks back several years. If records are missing, you are not automatically doomed, but you will need to be strategic.

Start by seeking replacements. Banks can provide statements. Accountants may have copies of working papers. Employers can reissue P60 details. Online bookkeeping platforms might still have exports. Letting HMRC know you are actively trying to obtain records can help demonstrate cooperation.

If some records cannot be recovered, you may need to reconstruct figures using secondary evidence. For example, you might use bank deposits as a proxy for turnover, or supplier records to rebuild expense categories. Any reconstruction should be clearly explained, with assumptions stated. HMRC may accept a reasonable estimate where perfection is impossible, but they are less likely to accept vague guesses.

How to prevent future “reopened year” surprises

Keep records longer than you think you need

Even if you feel confident, keep key documents in a secure digital format. The practical burden of storing PDFs is low compared to the stress of rebuilding records later. For businesses, having a robust bookkeeping system and regular backups is invaluable.

Check the basics before submitting returns

Many issues arise from simple omissions: forgetting bank interest, misreporting dividends, mixing up gross and net figures, or overlooking benefits. A checklist approach can help: compare the return to your bank statements, P60/P11D information, rental statements, and year-end accounts.

Be cautious with complex reliefs or aggressive interpretations

If you are claiming reliefs you don’t fully understand, or applying interpretations that push boundaries, the risk of a later challenge is higher. Getting advice upfront can save significant time and money.

Respond promptly and keep communications organised

Even if HMRC is wrong, the easiest disputes to resolve are those where you respond clearly, on time, with organised evidence. Keep copies of everything you send and make notes of any phone calls, including dates, names, and what was agreed.

Closing thoughts: a reopened year is a process, not a verdict

When HMRC revisits a past year, it can feel like the ground has shifted. But a reopened year is not automatically a sign you’ve done something wrong, and it doesn’t mean you have no options. In many cases, the issue is a data mismatch, a coding correction, or a technical classification question that can be resolved with evidence and clear explanations.

The best approach is to treat the situation as a structured problem: identify what HMRC has done, understand the scope and deadlines, assemble records, and respond calmly and thoroughly. If the amounts are significant or the allegations imply careless or deliberate behaviour, professional advice can help protect your position and reduce the risk of avoidable penalties.

Ultimately, “closed” in tax is often more of a feeling than a legal reality. Knowing the pathways HMRC uses to revisit earlier years—and how to respond—turns an unsettling letter into a manageable process with clear steps and outcomes.