Caught by HMRC’s AI: They Know More Than You Think

David
3 days ago
2 min read

Many sellers assume HMRC’s checks are random...

HMRC’s digital tracking system, known as Connect 2.0, is quietly one of the most powerful data tools in the UK. It links information from banks, online marketplaces, and even social media to paint a complete picture of your income — whether you’ve declared it or not.

Many sellers assume HMRC’s checks are random. They’re not.If you’ve received one of those polite “nudge” letters that says “We believe you may have additional income to declare,” it’s because Connect has already found something.

That letter isn’t guesswork — it’s your warning that HMRC’s system has matched your sales data, bank deposits, or online listings with your declared income.

What Connect 2.0 actually sees

The system gathers data from a huge range of sources:

Online platforms like eBay, Etsy, Vinted, Depop, Amazon, and Facebook Shops
Bank and payment processor records (PayPal, Stripe, etc.)
Property websites, Companies House, and even social media accounts

It cross-checks all that against your Self Assessment returns.If your declared income doesn’t match your digital footprint, a flag is raised.

This is all legal under the Digital Economy Act 2017, which gave HMRC the power to collect and combine third-party data at scale. It’s not science fiction — it’s real, live data analytics in action.

Why silence is the worst response!

If you ever get a “nudge” letter, respond immediately. Ignoring it moves your case from automated review to manual investigation, and that’s where penalties can get serious.HMRC views non-response as deliberate concealment, not confusion — and deliberate under-declaration can lead to fines of up to 100% of the tax owed.

The simple way to stay clear

The best defence is to stay transparent.Keep your records, know your totals, and declare what you earn. Even if your income is under the £1,000 trading allowance, it’s smart to stay organised — because HMRC already knows roughly what you’re earning.

At Sole Seller Tax, we take your marketplace sales and turn them into a clean, HMRC-ready report. No software, no jargon — just numbers that match what HMRC will see.

HMRC might not come knocking, but if they do, be ready.

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