Fee Protection: Taxpayers remain at risk of investigation as HMRC increases focus on the self-employed and company directors

14 October 2025 • HMRC, Warrener Stewart, Warrener Stewart Edinburgh, Warrener Stewart London

The scrutiny is nothing new. Self-employed individuals and company directors in the UK have long faced the risk of investigation into their tax affairs from HMRC. Whether selected at random or flagged through data systems, any formal investigation must be correctly handled – and that requires professional support.

New systems for the self-employed and business directors

In recent years, HMRC has acknowledged that its processes for the self-employed are not particularly robust. With scope for misinterpretation and many taxpayers reporting difficulties contacting HMRC for guidance, it’s hardly surprising that change is coming.

In 2026, HMRC will finally roll out its long-planned Making Tax Digital initiative, placing greater emphasis on taxpayers to comply with a more comprehensive tax return process – and in some cases making professional financial support essential.

Increasing numbers of investigations likely

The gap between what HMRC should collect and what it actually collects is estimated at £35.5 billion annually – a significant shortfall. It’s hoped that the new system will create greater transparency and reduce that gap. Yet, with more detailed returns come increasing opportunities for HMRC to investigate.

There are several reasons why taxpayers might undergo formal investigation by HMRC: random selection, late filing, errors requiring correction, a notable change to a figure, such as a large pension contribution – all can trigger concern and result in scrutiny. HMRC’s Connect database also compiles data on individuals from a range of financial and personal sources, further increasing the likelihood of investigation.

Protection from the cost of investigation

On average, an HMRC investigation costs £1,000 plus VAT in professional fees, and can be significantly higher. To protect against this, taxpayers can take out insurance at a fraction of the price through a Fee Protection scheme, which covers all professional costs arising from HMRC investigations.

As HMRC sharpens its focus on business directors and the self-employed, the number of individual investigations will undoubtedly rise. Being financially prepared is a prudent step.

To find out more about Fee Protection and our Personal Tax services, contact us on 020 7731 6163 or email info@warrenerstewart.com