UK Tax Gap Hits Record £59.2 Billion: What HMRC's 2024–25 Figures Mean for Businesses

HM Revenue & Customs published its Measuring Tax Gaps 2026 edition on 23 June 2026, estimating that £59.2 billion of tax due for 2024–25 was not collected — 6.4% of total liabilities. That is the highest monetary gap on record and follows upward revisions to earlier years as HMRC improved data and methodology.

The release landed alongside HMRC's broader Tax Update 2026 package. For sole traders, landlords, and small companies, the message is clear: compliance enforcement is expanding, and errors or careless filing — not just deliberate evasion — account for much of the shortfall.

HMRC collected £865.2 billion in tax in 2024–25, representing 93.6% of liabilities. The remaining £59.2 billion is the provisional tax gap.

The percentage gap has fallen from 7.5% when measurement began in 2005–06, but recent years show volatility. The 2023–24 estimate was revised up from 5.3% (£46.8bn) to 6.0% (£52.8bn), and 2022–23 is now estimated at 6.6%.

HMRC emphasises that gaps are revised as more data arrives — treat the figures as directional for policy, not a precise invoice-by-invoice audit of your business.

Corporation tax accounts for 35% of the total gap by value — roughly £21 billion — with the corporation tax gap rate rising to 18.1%. VAT underpayment contributes about £12.1 billion (20% of the total), while income tax, NICs, and capital gains tax together make up another 35% share.

Small businesses remain the largest customer group at 62% of the gap. Around half of the small business shortfall relates to corporation tax — relevant for owner-managed companies, not only large groups.

By behaviour, failure to take reasonable care (35%) is the biggest driver, followed by error (16%) and evasion (12%). HMRC's compliance yield reached a record £48 billion in 2024–25 — tax that would have gone unpaid without intervention.

The Spending Review 2025 allocated £1.7 billion to HMRC over four years for 5,500 additional compliance staff and 2,400 debt management roles. Industry commentary expects more VAT and corporation tax enquiries as a result.

Measures announced since Autumn Budget 2024 aim to raise a further £10 billion a year by 2029–30 through closing the gap — including marketplace VAT rules, digitisation, and stricter agent regulation outlined in June's Tax Update 2026.

HMRC Chief Executive JP Marks framed the strategy as making it easier to get tax right first time while responding firmly to non-compliance — a shift from relying solely on post-filing investigations.

Review VAT return reconciliations and corporation tax provision workings before filing — governance and process errors now attract attention alongside aggressive planning.

Keep contemporaneous records for expenses, benefits, and R&D claims. MTD-aligned digital records reduce error risk and speed up responses if HMRC opens an enquiry.

FinnAccountings Compliance Agent flags anomalies against HMRC norms and tracks filing deadlines — start a free trial to strengthen your compliance posture before enquiry activity intensifies.