New HMRC data reveals the UK tax gap has widened to £46.8 billion in 2023-24, representing 5.3% of total expected tax revenues—up from £39.8bn (4.8%) the previous year.
What Is the UK Tax Gap?
The tax gap measures the difference between the taxes owed and the amount actually collected by HM Revenue & Customs (HMRC). The latest figures highlight growing challenges in tax compliance and enforcement.
Key Findings from HMRC’s Report
✔ Small businesses now account for 60% of the tax gap (up from 48% in 2019-20).
✔ Corporation tax makes up the largest share (41%) of uncollected taxes.
✔ Income tax & National Insurance follow as the second biggest contributors.
✔ Tax evasion by criminals has dropped from 12% to 9% since 2019-20.
✔ Individuals & wealthy taxpayers contribute 10% of the total gap.
Why Has the Tax Gap Increased?
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Economic pressures – Rising costs may be squeezing small businesses’ ability to comply.
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Complex tax rules – Smaller firms struggle with reporting requirements.
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Enforcement challenges – HMRC faces resource constraints in tackling evasion.
What Does This Mean for the UK?
🔹 Lost public funds – The £47bn shortfall could have funded key services like NHS, education, and infrastructure.
🔹 Crackdown expected – HMRC may ramp up tax investigations & penalties for non-compliance.
🔹 Calls for reform – Experts urge simpler tax systems to help small businesses meet obligations.
Will HMRC Close the Gap?
While fraud-related tax losses have declined, the rising small business tax gap suggests new strategies are needed. Potential measures could include:
✅ Better support for SMEs – Clearer guidance & digital tools.
✅ Stronger enforcement – Targeting high-risk sectors.
✅ Policy reforms – Reducing complexities in tax filing.
The Bottom Line
The UK’s growing tax gap underscores the need for better compliance systems—especially for small businesses. With £47bn at stake, expect tighter HMRC scrutiny in the coming year.
