Finance Bill 2025-26 briefing: Electronic Communications proposed powers clause 258

Although we support HMRC's move towards digital communications we have concerns over new powers in the Finance Bill 2025–26 that would allow HMRC to require all taxpayers using its digital services to provide and maintain up‑to‑date electronic contact details, such as an email address or mobile number, or face penalties of up to £1,000.

Under Clause 258, HMRC plans to shift to digital‑by‑default communication, with taxpayers able to opt out only in limited circumstances. Anyone filing returns online would be required to supply valid digital contact details, and failure to update them after a change could trigger a financial penalty. We welcome the right of taxpayers to opt out of digital communications. However, if this is limited to only those who are digitally excluded and does not include those who wish to use an agent, this creates a
risk that vital messages will be missed.

Taxpayers who rely on agents, may set up digital access in order to authorise the agent but rely in the agent to handle all future correspondence thereafter. The current proposals assume direct communication with the tax payer only, which could result in critical messages being missed. There are also no clear rules for personal representatives managing a taxpayer’s affairs after death..

We have highlighted that the proposed £1,000 fine is unprecedented for what is essentially an administrative oversight. Notably, there is no equivalent penalty for failing to update a postal address, despite this being a long‑standing HMRC requirement. This inconsistency risks undermining trust and creates an unnecessary compliance burden.

We are also concerned about security issues. Taxpayers who fall victim to hacking or identity theft may be unable to access or update their digital details for extended periods. Penalising them during such disruption, would exacerbate stress at an already difficult time. The legislation also sets no clear timeframe for notifying HMRC of changes.

To mitigate these risks, we recommend a significantly lower penalty, a soft‑landing period, and at least 90 days for notifying changes. We also urge HMRC to prioritise a fully interactive two‑way digital messaging system, including agent access, rather than a one‑way channel (HMRC to  taxpayer), alongside stronger security testing and clear processes for deceased taxpayers and those who are digitally excluded.