Wake up call for government as big increase in tax going unpaid
23 June, London – HMRC, the government body responsible for taxation, has today released its latest figures showing the gap between what tax is owed, and what tax is paid, known as the Tax Gap. The tax figures are published annually, and the 2026 edition shows that the tax gap in 2024-25 was estimated to be 6.4% of total theoretical tax owed – or in absolute terms £59.2 billion. This marks a £6.4 billion increase from the previous year (2023-24), and a £12.8 billion increase compared to the figure for 2023-24 that HMRC published last June, which has now been revised upwards.
The government has pledged to raise a further £8.8bn a year by 2029-30 as a result of measures to close the tax gap. This revenue is crucial to spending plans, but now looks under threat given the increase in the latest figures published.
The Tax Gap for wealthy individuals (the top 2% of taxpayers in the country) has seen a significant increase, with the tax liabilities being dodged by the richest now exceeding all other taxpayers combined. Table 1.3 shows this has gone up from £2.5bn to £3.6bn over the past year. This comes in the wake of a report from the National Audit Office in 2025 that showed compliance yield from the very wealthiest was £5.2bn in 2023-24, suggesting that the scale of wealthy non-compliance is likely to be higher still, than HMRC are stating.
HMRC is currently consulting on plans for tax compliance for the wealthiest which will be drawn into sharp focus. In 2017 the tax authority abandoned its high net-worth unit that was dedicated to tax compliance among Britain’s wealthiest individuals.
HMRC has made good progress over the past six months hiring significant numbers of new staff to tackle tax dodging. Investing in tax compliance is incredibly good value for money: in 2024-25, every pound spent on HMRC’s compliance functions raised or protected £23 in additional tax revenues, a figure that has been rising since 2022-23.
Significantly, HMRC is also still refusing to disclose information it holds about the ‘offshore Tax Gap’. A Freedom of Information request by TaxWatch previously revealed that HMRC has the data and ability to estimate the amount of tax going uncollected from UK taxpayers’ overseas income and gains, including from assets in tax havens, but has refused to release the figures.
Pressed again by MPs on the Treasury Select Committee in January, HMRC’s Chief Executive and senior staff admitted that HMRC “do[es] internally hold documents and evidence on the nature of particular [offshore tax] risks”, including “indicative numbers…of what might be at stake“, but again refused any public disclosure, arguing implausibly that releasing even the overall total figure risked encouraging “copycats or people trying to exploit weaknesses”.
Of note, by groupings, small businesses accounted for 62% of the Tax Gap, with a further 7% resulting from mid-sized businesses. HMRC previously stated that around 45% of the small business Tax Gap was a result of carelessness or error. However, what is not as clear is the type of businesses, legal or illicit, that are responsible for the figure – though HMRC does state that the share attributed to criminals stood at 8%. It is apparent from the latest figures that there is a clear need for HMRC to make it easier for ordinary people and businesses to get their taxes right, and harder for the very richest to dodge it.
Mike Lewis, Director at TaxWatch [1] said:
“The untold story of this government’s economic plans is that they’ve bet the house on closing the tax gap. But today’s figures show a significantly worse picture than we saw last year. The tax gap has been rising since 2017-18, and HMRC thinks it increased by over £6 billion in this government’s first year in office. The Chancellor has promised that in just three years time it will be raising nearly £9 billion extra annually thanks to measures to shrink the tax gap. Those measures are the government’s third biggest revenue-raising policy. Today’s figures show how far they still have to go.”
Caitlin Boswell, Deputy Director at Tax Justice UK [2] said:
“It’s a massive worry that the tax gap for the wealthiest has increased over the past year, at the same time the Chancellor promised to crack down on it. So it’s even more concerning that HMRC still won’t publish the real tax gap for wealth held overseas by the richest and most powerful people in Britain. With wealth inequality spiralling and ordinary people across the UK struggling to make ends meet, it’s abhorrent that the super-rich are dodging paying their fair share. It’s robbing the country of the investment it needs. Any incoming Prime Minister and Chancellor must recognise the size of this problem and address it head on to make the tax system fair and raise revenue that could make genuine improvements to people’s lives.”
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Notes:
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 // or Mike Lewis on mike@taxwatchuk.org
[1] TaxWatch 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.
[2] Tax Justice UK is one of the country’s leading campaigning and advocacy organisations working to bring about progressive tax reform. We campaign for a fairer tax system that takes more from the very wealthy. A tax system that actively redistributes wealth to tackle inequality; that funds high quality public services that we all rely on; and raises money to tackle climate change and doesn’t subsidise environmentally destructive business. Tax Justice UK is an independent partner of the Tax Justice Network.