Go back to insightsA £59.2 Billion Tax Black Hole
New research from HMRC has put a striking figure on the amount of tax that goes uncollected each year.
At £59.2 billion, the UK’s tax gap is a substantial sum. To put it into perspective, that equates to around £850 for every man, woman and child in the country.
In tax terms, the figure represents:
- HMRC’s estimate of the tax gap for 2024/25 – the difference between the amount of tax that should have been collected and the amount that actually reached the Treasury.
- A sum £8.6 billion lower than the total additional tax revenue forecast to be raised by Rachel Reeves across her two Budgets as Chancellor.
As with any estimate, the tax gap cannot be measured precisely. However, HMRC has calculated and published the figure annually since 2005/06, providing a useful indication of long-term trends.
Back in 2005/06, the tax gap was estimated at 7.5% of all tax due. The latest estimate stands at 6.4% for 2024/25, suggesting progress has been made, although a significant amount of revenue still goes unpaid each year.
HMRC analyses the tax gap in several ways, highlighting the various reasons why tax due does not ultimately make its way into government coffers.
Source: For 2024.25, Table 1.2, ‘Measuring the tax gap tables online’, .gov.uk
Source: For 2024.25, Table 1.3, ‘Measuring the tax gap tables online’, .gov.uk
In the 2024/25 tax year, HMRC generated £48 billion in additional revenue through its compliance activities, including investigations, enquiries into tax returns and other measures designed to protect tax revenues.
Reducing the tax gap remains a key objective for successive governments, largely because it offers the prospect of increasing tax receipts without introducing new taxes. To support this effort, the Government’s 2025 Spending Review allocated £1.7 billion to HMRC, funding the recruitment of 5,500 additional compliance officers and 2,400 debt management staff. Overall, measures announced since the Autumn Budget 2024 are intended to reduce the tax gap by £10 billion a year by 2029/30.
Achieving that target is likely to depend heavily on improving tax collection from small businesses, which account for a significant proportion of the tax gap. Around half of this shortfall relates to corporation tax. However, this is a particularly challenging area for HMRC, given the sheer number of smaller enterprises operating in the UK.
Government estimates suggest there are around 5.6 million businesses with fewer than 50 employees, compared with fewer than 8,500 large businesses employing 250 or more people. Given those numbers, there comes a point where pursuing compliance activity among smaller businesses is simply not cost-effective for HMRC.
As a result, taxpayers can expect HMRC to continue seeking more timely and detailed financial information. Initiatives such as Making Tax Digital for Income Tax are part of this broader strategy. Similarly, further proposals aimed at shortening the gap between earning income and paying the associated tax are likely to follow, including recently announced plans to accelerate payments on account.
Tax treatment depends on individual circumstances and may be subject to change.
The Financial Conduct Authority does not regulate tax advice.