If you hold assets, income or gains overseas, you may at some point receive a letter from HMRC asking you to review your UK tax position.
These are often referred to informally as “nudge letters” and they can be unsettling to receive. Here is what they mean and how to respond.
In recent years, HMRC has increased its use of these letters and so it is important to know how to react, should you receive one.
What is a nudge letter?
HMRC uses these letters as part of what it calls a One-to-Many approach, sending the same message to a group of taxpayers to prompt them to check their affairs.
Importantly, HMRC’s own guidance confirms that this type of letter is not, in itself, a formal compliance check. It is a prompt to review your position and may not be indicative that anything is wrong.
The letters often arrive with a Certificate of Tax Position enclosed, inviting you to select a statement, sign it and return it.
Why are HMRC sending them now?
The rise of these letters reflects how much more information tax authorities now share internationally.
Under the OECD Common Reporting Standard and FATCA, HMRC receives details of foreign bank, custody and investment accounts held by UK residents, including balances, income and, in some cases, disposal proceeds.
HMRC can also request information directly from other tax authorities, draw on UK third-party data such as reports from letting agents and, since 2024, receive information from digital platforms about online sellers.
All of this is reviewed via HMRC’s Connect system to identify the potential underpayment of tax, by accessing each individual’s combined income from all sources.
None of this means HMRC has already concluded that tax is owed, but rather that it may be due as its records aren’t complete.
Should you sign the certificate?
No, there is no legal obligation to complete and return the certificate and HMRC has confirmed it will accept a response by letter instead, which is what we typically recommend in most instances.
We recommend this as the certificate is not limited to a single tax year.
It covers all years and has no minimum threshold, so a broad declaration can carry unexpected risks, especially if your affairs involve several accounts, investments, trusts or a change in residence status at some point.
A letter allows us, as your adviser, to explain your position clearly and to respond only to the issues under review.
Here to help you
If you receive one of these letters, it is important to check your tax position carefully and reach out to us so that we can review the years concerned, reconcile any overseas accounts or investments against what has been reported to HMRC and confirm that residence, remittance basis claims, foreign tax credits and any reliefs have been correctly applied.
Depending on what that review shows, the appropriate response might be a written explanation confirming everything is correct, a request for more time or further information, an amendment to a return or a formal disclosure through the appropriate route.
It is important, however, that you do not just ignore the letter, as HMRC will likely follow up and may look further into your affairs in response.
Please get in touch with us if you receive a nudge letter from HMRC, so we can support you with any review or enquiry into your tax position.
