Withholding of tax for rewards received under the Strengthened Reward Scheme
Published 13 July 2026
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Who is likely to be affected
This measure affects informants who receive a reward from the Strengthened Reward Scheme (‘the scheme’). Informant rewards can only be paid to individuals.
General description of the measure
This measure ensures that informants who receive a reward under the scheme, receive this payment with Income Tax due deducted at source at the additional rate of 45%. Any further tax or repayment due will then be reconciled in the same way as any other payment received with Income Tax withheld.
This measure operates as a collection mechanism rather than a charging provision by collecting Income Tax at source on payments that are already chargeable under existing Income Tax law.
Policy objective
The policy objective of this measure is to simplify the process of paying tax due on rewards as the withholding mechanism ensures that the taxpayer will receive the reward with the Income Tax deducted already. HMRC acts as both the administrator of the rewards and collector of Income Tax due, and by withholding the Income Tax due at the point of payment, these organisational processes are simplified.
Background to the measure
This scheme was announced at Autumn Budget 2024 and launched at Budget 2025. The scheme is for individuals who report serious tax avoidance or evasion. Rewards are paid to informants who provide HMRC with high-value information, and for cases where tax over £1.5 million is recovered, HMRC will pay rewards up to 30% of the additional tax collected that would have otherwise gone unpaid (excluding penalties and interest) and payments received by informants will have Income Tax due deducted at the source at the additional rate of 45% .
Informant rewards paid by HMRC are already taxable under existing law and this measure introduces a statutory mechanism to secure Income Tax due at the point of payment.
Detailed proposal
Operative date
This measure will have effect on and after the date of Royal Assent to Finance Bill 2026-27.
Current law
HMRC have the power to pay rewards to informants under section 26 Commissioners for Revenue and Customs Act 2005. Rewards paid by HMRC are taxable income of the informant. Where the informant receives a reward in the course of their trade, it is treated as a trading receipt and is taxable under Chapter 2 Part 2 Income Tax (Trading and Other Income) Act 2005 (ITTOIA). In all other cases it is taxable as miscellaneous income under section 687 ITTOIA. Rewards are paid gross and any tax due is declared and paid through Self Assessment.
Proposed revisions
New section 974A Income Tax Act 2007 (ITA 2007) will be added to require HMRC to deduct tax at additional rate from a reward paid under the scheme before paying it to an informant.
Summary of impacts
Exchequer impact (£ million)
| 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 |
|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil |
This measure is not expected to have an Exchequer impact as it relates to the withholding mechanism only rather than the overall scheme.
The costings for the overall ‘Rewards for informants of high value tax fraud’, is set out in Table 4.1, Budget 2025 policy decisions in the overall ‘HMRC: Further measures to close the tax gap’ costing.
These costings have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2025.
Macroeconomic impact
This measure is not expected to have significant macroeconomic impacts.
Impact on individuals, households and families
This measure will affect informants who participate in the Strengthened Reward Scheme and receive an award. The reward received will have the Income Tax due deducted at the additional rate. Any repayment of tax or further tax due on the reward will be administered in the same way as any other payment received with Income Tax withheld.
This measure is expected to impact individuals’ experience of dealing with HMRC, as individuals will now receive a reward with the Income Tax due automatically deducted at the point of payment. This will simplify the payment of tax due on rewards.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure may apply to individuals regardless of their protected characteristics. HMRC does not hold data that it can use to assess whether there are any disproportionate impacts to protected groups.
Administrative impact on business including civil society organisations
There is no impact on businesses as this measure only affects individuals.
Operational impact (£ million) (HMRC or other)
This measure will not require any new changes to IT systems or impact staff resources. As such, this measure is not expected to create additional operational costs for HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
Consideration will be given to monitoring this measure through information collected from Self Assessment returns and kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, contact the Business Profits Team by email: businessprofits.admin@hmrc.gov.uk.