Tax returns no longer exist in isolation.
When an individual or business submits a return, HMRC may compare the figures with information it has received from employers, banks, pension providers, online platforms and overseas tax authorities.
HMRC can also request further records during a compliance check.
The government has recently taken steps to improve the third-party data that HMRC receives. In particular, its work has focused on bank and building society interest and information supplied by providers that process card payments for businesses.
For taxpayers, this creates both opportunities and risks.
Better data may allow HMRC to include more accurate information in online tax accounts and reduce the need for taxpayers to enter figures that HMRC already holds.
However, it may also allow HMRC to identify undeclared income or inconsistent returns more quickly.
Importantly, a difference does not always prove that the taxpayer made an error. Third-party data can contain timing differences, duplication, incomplete descriptions or information that needs further context.
Taxpayers should therefore understand what HMRC may know, keep suitable records and investigate differences before responding.
Why Is HMRC Using More Third-Party Data?
HMRC uses data to:
- help taxpayers report the correct figures;
- pre-populate or display information in digital services;
- identify differences between tax returns and external records;
- select cases for compliance checks;
- detect undeclared income;
- trace assets or financial connections;
- improve risk assessment; and
- focus resources on cases that may involve unpaid tax.
The government has said that better third-party data should help taxpayers get their tax right the first time while also supporting HMRC’s compliance work.
Its reforms focus on improving how data is collected, matched and used. The proposed approach includes more consistent reporting formats and better identifying information.
Recent work has concentrated on two important datasets:
- interest paid by banks, building societies and other providers; and
- card-sales information supplied by merchant acquirers and similar payment providers.
The government’s July 2026 technical consultation specifically addressed the quality and consistency of these datasets.
What Financial Information Can HMRC Receive?
HMRC can receive information through routine reporting, international exchange arrangements and formal information powers.
The information available depends on the taxpayer and the type of transaction.
Possible sources include:
| Source | Examples of information |
| Employers | Pay, tax deducted, benefits and expenses |
| Pension providers | Pension income and tax deducted |
| Banks and building societies | Interest and account-identifying information |
| Merchant acquirers | Card-payment totals linked to a business |
| Online platforms | Seller income and identifying details |
| Companies House | Company officers, accounts and ownership information |
| Land and property records | Property ownership and transaction details |
| Overseas tax authorities | Reportable foreign financial accounts |
| Taxpayer records | Returns, VAT submissions, payroll and previous disclosures |
| Third parties approached during a check | Documents reasonably required to check a tax position |
HMRC may combine or compare information from several sources. However, access to one piece of data does not necessarily give HMRC the full story behind a transaction.
Does HMRC See Every Bank Transaction Automatically?
No. It is important not to exaggerate HMRC’s routine access.
HMRC may receive information about bank and building society interest. It may also obtain information about financial accounts under international reporting arrangements.
However, routine data reporting does not mean that HMRC automatically watches every bank transaction in real time or receives every person’s complete bank statements without a legal basis.
During a compliance check, HMRC may ask the taxpayer to provide bank statements where they are reasonably required to check the tax position.
HMRC also has legal powers to require information from third parties or financial institutions where the statutory conditions apply. Schedule 36 of the Finance Act 2008 allows HMRC to request information or documents reasonably required to check a person’s tax position.
A taxpayer should therefore distinguish between:
- information routinely reported to HMRC;
- records requested from the taxpayer;
- information obtained from a third party; and
- data exchanged between tax authorities.
These routes involve different rules and safeguards.
Bank and Building Society Interest
Banks and building societies report information about interest to HMRC.
HMRC may use those figures when checking whether a taxpayer has declared the correct savings income.
The tax treatment will depend on factors such as:
- the amount of interest;
- the taxpayer’s other income;
- the Personal Savings Allowance;
- whether the account is an ISA;
- whether the account is held jointly; and
- whether the taxpayer is UK resident.
The amount reported by a financial institution may not always match the taxpayer’s calculation immediately.
For example:
- an account may be held jointly;
- the bank may use different identifying details;
- interest may relate to an account closed during the year;
- the taxpayer may have reported the amount in the wrong period; or
- the bank’s information may require correction.
Therefore, taxpayers should check annual interest statements rather than rely only on the amount shown in their online tax account.
Card-Payment Data
Providers that process debit and credit-card payments for businesses may supply data to HMRC.
This information can help HMRC compare card sales with:
- turnover reported in business accounts;
- VAT returns;
- Self Assessment figures;
- Corporation Tax returns; and
- sales records provided during a compliance check.
However, card-payment totals do not automatically equal taxable turnover.
The figures may include:
- VAT;
- refunds;
- chargebacks;
- tips;
- customer deposits;
- transactions processed for another party;
- duplicated settlements; or
- payments that relate to a different accounting period.
Equally, card sales may represent only part of a business’s income. The business may also receive cash, bank transfers or payments through online platforms.
Therefore, a difference needs reconciliation rather than an immediate assumption of undeclared sales.
Online Platforms and Digital Marketplaces
Online platforms may collect and report information about sellers who use their services.
This can affect people who sell goods, provide services, rent property or earn money through digital platforms.
The fact that a platform reports a person’s receipts does not automatically mean that the full amount represents taxable profit.
For example, someone selling personal belongings may not be operating a trade. A business seller may also deduct allowable expenses when calculating taxable profit.
However, frequent or organised selling can create tax obligations.
The taxpayer should consider:
- what was sold;
- why the items were acquired;
- how often transactions occurred;
- whether the activity aimed to make a profit;
- total sales proceeds;
- allowable costs; and
- whether Capital Gains Tax or trading-income rules apply.
Keep platform statements and transaction histories. A platform account may show gross receipts, fees and refunds separately, so the bank deposits alone may not reveal the complete position.
Overseas Financial Accounts
The Common Reporting Standard supports the automatic exchange of financial account information between participating jurisdictions.
Depending on the account and reporting rules, HMRC may receive details relating to:
- overseas bank accounts;
- investment accounts;
- account balances;
- interest;
- dividends;
- certain investment proceeds; and
- people who control certain entities or trusts.
The Common Reporting Standard developed from international efforts to create a global system for exchanging financial account information.
Receiving money overseas does not automatically create a UK tax charge. The correct treatment depends on residence, the type of income, any applicable relief and the relevant tax year.
However, UK-resident taxpayers may need to report overseas income and gains even if they leave the money abroad.
Taxpayers should not assume that an overseas account remains outside HMRC’s view.
Employment, Pension and Investment Information
HMRC already receives significant information through PAYE and other reporting systems.
This may include:
- employment income;
- tax deducted;
- benefits in kind;
- pension income;
- pension contributions;
- taxable termination payments; and
- certain investment income.
Problems can arise when:
- an employer reports an incorrect figure;
- the taxpayer has more than one job;
- a pension begins or ends during the year;
- benefits appear under the wrong period;
- income is reported twice; or
- a tax code uses estimated information.
Therefore, taxpayers should compare their records with the figures held by HMRC.
A figure appearing in an HMRC account should not replace checking payslips, P60s, P11Ds or pension statements.
How Does HMRC Match Financial Data?
HMRC may use details such as:
- name;
- address;
- date of birth;
- National Insurance number;
- Unique Taxpayer Reference;
- company registration number;
- bank account details; and
- other account identifiers.
Better identifying information can help HMRC match third-party data to the correct taxpayer.
However, matching is not always perfect.
People may have:
- changed their name or address;
- used different versions of their name;
- opened joint accounts;
- operated through several business names;
- used an old address;
- inherited an account; or
- become linked to an entity in a trustee or company role.
As a result, HMRC may connect information to a taxpayer that requires explanation or correction.
Does a Data Difference Automatically Trigger an Investigation?
Not every difference will lead to a full tax investigation.
HMRC may use the information in several ways. It could:
- update a tax code;
- show the figure in an online account;
- send a nudge letter;
- ask the taxpayer to check a return;
- open a compliance check;
- request supporting documents;
- amend a return or issue an assessment; or
- take no immediate action.
HMRC may also consider the size and nature of the difference, the taxpayer’s history and whether several data sources point to the same issue.
A small timing difference may require only a short explanation. A repeated difference across several years may lead HMRC to examine the position more widely.
Why Data Does Not Always Tell the Whole Story
Financial data shows that something happened. It does not always explain why.
For example, money entering a bank account could be:
- business income;
- rent;
- a transfer between the taxpayer’s own accounts;
- a loan;
- a gift;
- an inheritance;
- a tax refund;
- repayment of money previously lent;
- proceeds from selling a personal item; or
- money held for somebody else.
The tax treatment depends on the nature of the receipt, not simply the fact that it appeared as a credit.
Similarly, a large card-payment figure does not automatically represent profit. The business may have VAT, refunds and deductible expenses to consider.
This is why supporting records matter.
What Happens If HMRC Identifies a Difference?
HMRC may contact the taxpayer and ask them to:
- check whether the return is correct;
- explain a particular income source;
- provide a reconciliation;
- produce bank or platform statements;
- amend the return;
- make a disclosure; or
- confirm that no correction is needed.
Do not ignore the letter, even if you believe the return is correct.
First, identify:
- the tax year involved;
- the income source HMRC has identified;
- the figure held by HMRC;
- the figure reported on the return;
- the reason for the difference; and
- the evidence that supports the explanation.
If an error exists, calculate the correct position before responding.
If no error exists, explain the difference clearly and refer to the supporting documents.
What If the Third-Party Data Is Wrong?
Taxpayers should not amend a correct return merely to match inaccurate external data.
Instead:
- obtain the original statement;
- contact the organisation that supplied the data;
- ask it to correct its records where appropriate;
- explain the position to HMRC;
- provide supporting evidence; and
- retain proof of the correction request.
For example, if a bank attributes all interest from a joint account to one person, the account holders may need to clarify beneficial ownership and how the interest should be divided.
Correcting the source data can help prevent the same difference from appearing again.
Could Better Data Reduce Tax Errors?
Yes. More accurate third-party information could help taxpayers identify income that they might otherwise overlook.
For example, a taxpayer with several savings accounts may find it difficult to gather every interest statement. Reliable information displayed by HMRC could help them check the total.
However, pre-populated information should still be reviewed.
The taxpayer remains responsible for submitting an accurate return. They should not assume that:
- HMRC holds every income source;
- all figures are complete;
- the correct tax year has been used;
- jointly held income has been divided correctly; or
- the information has the correct tax treatment.
Better data should support accurate reporting, not replace the taxpayer’s own checks.
How Should Taxpayers Prepare?
The best response is not to fear HMRC’s data. It is to make sure that the tax return and underlying records tell the same story.
Taxpayers should:
- use separate business and personal bank accounts;
- reconcile sales to bank, cash and card receipts;
- retain annual interest and investment statements;
- download reports from online platforms;
- keep details of overseas accounts;
- document loans, gifts and transfers;
- compare PAYE information with P60s and payslips;
- review figures shown in HMRC online services;
- correct errors promptly; and
- investigate unexplained differences before submitting a return.
Good records allow a taxpayer to respond confidently if HMRC asks questions.
Practical Guide
| Situation | Recommended action |
| HMRC shows unexpected bank interest | Compare the figure with annual bank statements |
| Card-payment totals exceed reported sales | Reconcile refunds, VAT, fees, tips and timing differences |
| An online platform reports gross receipts | Separate sales, refunds, platform fees and allowable costs |
| HMRC identifies an overseas account | Review residence, income, gains and previous tax returns |
| A bank account contains large transfers | Document the source and purpose of each transfer |
| Joint-account income appears under one taxpayer | Confirm ownership and how the income should be divided |
| Third-party data appears incorrect | Contact the provider and give HMRC supporting evidence |
| A return omitted taxable income | Calculate the correction and consider an appropriate disclosure |
| HMRC sends a nudge letter | Review the full tax position before signing any declaration |
| HMRC requests records formally | Check the notice, scope, deadline and appeal rights |
Do not provide a rushed explanation based on memory alone. Reconcile the figures and preserve the original evidence.
Frequently Asked Questions
Can HMRC see my bank account?
HMRC receives some information from financial institutions and can use legal powers to request further information where the conditions apply. However, this does not mean that HMRC automatically monitors every personal bank transaction in real time.
Does HMRC know how much bank interest I receive?
Banks and building societies report interest information to HMRC. Nevertheless, taxpayers should check their own statements because joint accounts, timing and data-matching problems can create differences.
Can HMRC see overseas bank accounts?
HMRC can receive reportable financial account information from participating jurisdictions under international exchange arrangements. The information available depends on the account, institution and reporting rules.
Do card-payment figures prove business turnover?
Not by themselves. Card data may include VAT, refunds, chargebacks, tips or timing differences. The business should reconcile the data with its sales records and bank receipts.
Will selling personal items online create a tax bill?
Not necessarily. Selling unwanted personal belongings does not automatically amount to trading. The facts, frequency, purpose and nature of the activity determine the tax position.
What should I do if HMRC’s information is wrong?
Gather the supporting evidence, contact the organisation that supplied the information and explain the difference to HMRC. Do not change a correct return simply to match incorrect data.
Does HMRC need my permission to contact my bank?
Not in every situation. HMRC has statutory powers to request information from taxpayers, third parties and financial institutions when the legal conditions apply. Different safeguards apply depending on the type of notice.
Should I disclose an error before HMRC contacts me?
Correcting an error voluntarily can produce a better penalty position than waiting for HMRC to discover it. However, review the full facts and use the correct disclosure route.
Where to Find Official HMRC Information
You can find current official information here:
- Better use of third-party data, explaining the government’s plans to improve financial data supplied to HMRC.
- Technical consultation on bank interest and card-sales data, covering proposed improvements to the quality and consistency of reporting.
- HMRC information and inspection powers, explaining HMRC’s powers under Schedule 36.
- Common Reporting Standard guidance, covering the automatic exchange of financial account information.
- Compliance-check factsheets, explaining HMRC checks, information notices, penalties and taxpayer rights.
- Tax compliance checks, providing an overview of what happens during an HMRC check.
- Correct a Self Assessment tax return, explaining how to amend a return within the available time limit.
- Tell HMRC about undeclared income, explaining the available disclosure routes.
The data available to HMRC and the correct tax treatment depend on the taxpayer’s circumstances. Therefore, check current guidance and seek professional advice where necessary.
💡 Key Takeaway
HMRC is improving how it receives and uses financial information from banks, payment providers and other third parties.
This means that inconsistencies between tax returns and external data may become easier to identify.
However, data does not always provide the full context. A bank credit is not automatically taxable income, card receipts are not automatically profit and an overseas account does not automatically create a UK tax liability.
The strongest protection is accurate reporting supported by clear records.
Review third-party figures, reconcile differences and correct genuine errors promptly. If HMRC contacts you, establish what the data represents before agreeing that additional tax is due.
Need Help?
If HMRC has contacted you about bank interest, card sales, online-platform income or an overseas account, Accounts Tax Group can help you understand the information and compare it with your tax returns.
We can reconcile the figures, identify timing or reporting differences and prepare a clear response. If the review reveals undeclared income or another error, we can also help calculate the liability and choose an appropriate disclosure route.
Contact Accounts Tax Group before responding to a significant HMRC data query or signing a declaration that your tax affairs are complete.
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