‘Tax Gap’ has increased to £47bn, though likely a significant underestimate

19 June 2025 – The official gap between the amount of tax owed and what the government collects, has grown to nearly £47 billion, new HMRC figures show. The Tax Gap in the year 2022-23 was originally published as £39.8 billion, though has since been revised upward from 39.8bn (4.8%) to £46.4bn (5.6%). This is consistent with a trend since 2019 which will most likely see the latest figures revised upward in the coming months.

Mike Lewis, Executive Director at TaxWatch said:

“HMRC’s Tax Gap figures show 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.’

Caitlin Boswell, Head of Advocacy and Policy at Tax Justice UK said:

“The real story here is that the UK’s tax authority doesn’t have the resources or backing it needs to tackle the tax gap which is likely far larger than what is published. Evidence suggests that the level of tax non-compliance among the super-rich is far higher than estimated, with eye-watering sums of hoarded wealth being held offshore and out of sight of HMRC. Collecting the right tax, to invest in better healthcare, education and social security requires reliable investment and political backing in HMRC. Instead, the department has to battle fluctuations in staffing resources, has disbanded its unit dedicated to collecting tax from ultra wealthy individuals and is expected to weather real-terms cuts to budgets in the coming years.”

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For further information, comment, or to arrange an interview, please contact Jake Woodier, Tax Justice UK Deputy Director: Communications, on 07503 789994 or jake@taxjustice.uk

[1] Tax Justice UK is a campaigning and advocacy organisation. Our mission is to ensure that everyone in the UK benefits from a fair and effective tax system. We are not-for-profit and politically non-aligned. Tax Justice UK is a partner of (but independent from) the Tax Justice Network.

[2] TaxWatch (www.taxwatchuk.org) is a UK investigative thinktank which conducts forensic research and analysis on tax administration, tax avoidance and evasion, and tax law, to improve public understanding of tax issues.

[3] HMRC publishes figures for ‘compliance yield’ and ‘compliance spend’ for different categories of taxpayer. We can use these figures to produce an approximate estimate of the ‘return on investment’ for HMRC’s compliance efforts with regard to different taxpayer categories:

[4] In the 2025 Comprehensive Spending Review, HMRC’s assessment represents a real-term budget cut of 1.5 percent annually from 2025/6 to 2029/30. 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 (Resource DEL) will only increase by 0.7% annually to 2028/9. This is below this year’s civil service pay deal, suggesting future headcount cuts may still possible elsewhere.  There will also be a 24 percent annual real-terms cut in HMRC capital spending to 2030: by far the largest cut to any government department’s capital budget.

[5] Indications that wealthy tax non-compliance is underestimated in the Tax Gap: according to a May 2025 National Audit Office report,  in 2023/4 HMRC compliance teams obtained £5.2bn of unpaid taxes from ‘wealthy taxpayers’ (those with incomes over £200,000 or assets of over £2 million in any of the last three years, encompassing around 850,000 individuals). Yet HMRC’s Tax Gap estimate for tax going unpaid by wealthy individuals annually has only been between £1.6bn ad £1.9bn since 2020. As the NAO pointed out, either wealthy individuals have become much less compliant, but HMRC “has then been successful in tackling the increase in non-compliance through its compliance activity, such that the amount of non-compliance it is unable to stop has remained the same” (such a large behaviour change amongst wealthy individuals is highly unlikely); or levels of tax non-compliance among wealthy individuals are much greater than HMRC’s estimates.

The NAO also reported that HMRC’s ‘wealthy individuals’ team has collected yield from a single large case “with a value of £2.5 billion which was processed over the years 2022, 2023 and 2024”. This is larger than HMRC’s entire tax gap estimate for ‘wealthy individuals.’

[6] Indications that offshore evasion is underestimated in the Tax Gap: In October 2024, HMRC provided an estimate of tax evaded by UK taxpayers through non-UK financial accounts. However, this estimate only encompassed one class of offshore income of a single group of relatively easily identifiable taxpayers: financial income (interest, dividends and gains from the sale of financial assets) accruing in foreign bank accounts held directly in the name of an individual matchable to a UK self-assessment taxpayer, and in a country which in that year exchanged foreign account information automatically with the UK revenue authority in 2018-19 (the only year for which HMRC has made an estimate). This estimate forms part of the ‘self-assessment’ and ‘hidden economy’ sections of the published Tax Gap.

In May 2025, however, the National Audit Office, commenting on this £300m ‘offshore account tax gap’ figure, reported that “Internally, HMRC has identified a much larger amount of tax at risk from all forms of offshore non-compliance, but it does not publish this figure.”