20/06/25

UK: Rich and tax evaders are keeping £46bn a year due to HMRC failures

As published on: msn.com, Friday 20 June, 2025.

The UK’s tax gap has widened according to latest figures from HM Revenue & Customs (HMRC).

New data from HMRC shows that the UK missed out on £46.8bn of tax liabilities in the 2023-2024 financial year, or 5.3 per cent of the total theoretical tax liabilities.

The gap refers to the difference between the total amount of taxes owed to the government and the amount actually collected. In 2024 this was reported to be £39.8bn or 4.8 per cent of overall theoretical liabilities.

The taxman said small businesses are the largest component of the tax gap by customer group at a 60 per cent share in 2023 to 2024 up from 48 per cent of the overall tax gap in 2019 to 2020.

It estimates the tax gap due to criminals has fallen from 12 per cent of the overall tax gap between 2019 to 2020 to 9 per cent from 2023 to 2024.

The tax gap due to individuals and wealthy individuals has changed little since 2019 to 2020 and accounts for 10 per cent of the overall gap in 2023 to 2024, HMRC said.

The tax man said the largest part of the gap by tax type is uncollected Corporation Tax (41%), followed by Income tax, National Insurance contributions and a Capital Gains Tax gap. Uncollected VAT amounts to nearly a fifth (19%) share of the overall tax gap.

Rachael Griffin, tax expert at Quilter, said the rise in corporation tax going uncollected was a “red flag” amid concerns over economic uncertainty and global tax competition.

She believed the rise is “likely driven by a mix of economic strain, increased complexity in the global tax system, and perhaps a lag in HMRC enforcement capacity”.

HMRC said the combined share of the tax gap attributed to individuals and the wealthiest now accounts for just 10 per cent of the overall amount.

A report earlier this year from the spending watchdog, the National Audit Office called into question the accuracy of HMRC’s figures, warning that levels of tax evasion and avoidance by Britain’s rich may be much higher than HMRC previously thought. The complexity of their affairs allows for greater opportunities for dishonesty, the report concluded.

Despite this a special investigations team doubled its tax haul from wealthy people in 2023-24, compared with the previous year, in a crackdown on the wealthy. A department at HMRC set up to target wealthy taxpayers netted more than £1.5bn in 2023-24.

Mike Lewis, director the TaxWatch think tank, said: “HMRC’s Tax Gap figures are rising – up from an estimated £40bn last year to nearly £47bn this year. it shows us the scale of what improving tax collection could do for the public finances.

“But it’s also important to know what’s not in those figures. Recent reporting by the National Audit Office suggests that there may be serious under-estimation of tax going unpaid by wealthy individuals, through offshore tax evasion, and in areas like online retail.

“Providing HMRC with the tools and funding it needs to close the tax gap should be a priority. Every pound that HMRC spent last year ensuring companies and individuals pay their taxes generated £17.45 in due taxes collected or protected.

“For spending on large companies’ tax compliance, that figure rose to £46.33. Chasing just one single wealthy taxpayer’s unpaid taxes brought in £2.5bn of extra revenue between 2022-24. That’s larger than the overspend by all NHS provider trusts in those years.”

MPs have also questioned HMRC’s approach to criminal prosecutions especially its declining use of criminal prosecutions and apparent reluctance to take a more aggressive stance against tax evaders.

Critics have questioned whether the taxman will be able to close the gap given the squeeze on its budgets. Mike Lewis said: “To tackle the tax gap, the Chancellor has promised 5,500 new HMRC compliance staff and 2,400 new debt management staff by 2029. In real terms, however, HMRC’s day-to-day spending will only increase by 0.7 per cent annually to 2028/9. This is below this year’s civil service pay deal, suggesting headcount cuts are still possible elsewhere.”

He said staffing at the authority fell 4 per cent last year. “In the next 12 months it will have to deliver the biggest change in a generation to how self-employed people and sole traders do their taxes. It’s a department wrestling with legacy systems, which won’t be helped by the 24 per cent cut in its capital spending to 2030: by far the largest cut to any department’s capital budget.”

Tax investigators say HMRC has been thwarted in its efforts to act against tax advisers who enable their clients to avoid and evade tax. They say a welter of legal and procedural obstacles hinder their efforts.

HMRC said its plans to digitize the tax system is already helping to reduce the element of the tax gap caused by error and failure to take reasonable care. It said it has also been given an additional £1.7bn funding over the next four years to recruit an additional 5,500 compliance and 2,400 debt management staff in a bid to ensure more due tax is paid and reduce the gap.

James Murray, a Treasury Minister and chair of the tax collection agency’s board, said: “Every pound of tax uncollected puts a greater burden on honest taxpayers and deprives our public services of vital funding.

“In our first year in office, we have set out plans to raise an extra £7.5bn through the most ambitious ever package to close the tax gap. We are determined to go further and faster to make sure everyone pays their fair share.”

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UK Tax evasion HMRC