11 September 2026
For those who are interested in the collection of tax, the latest figures concerning the tax gap have now been released.
The tax gap report started by looking at the 2005/6 tax year and continues to be useful for understanding where the gaps in tax compliance persist and what measures might be introduced to tackle them.
Understanding your tax position is vital, as the figures indicate that further compliance crackdowns might be on the cards.
Is the tax gap a growing problem?
When the amount of tax owed in the UK is compared to the amount collected, the remaining figure is known as the tax gap.
Representing a loss of vital revenue for the country, the tax gap for the 2024/25 tax year is estimated to be around £59.2 billion.
This high cash value reflects the record amount of tax collected, but this should not obscure the scale of the issue. The current tax gap is 6.4 per cent of total theoretical tax liabilities. While this is higher than the 6.0 per cent estimate previously published for the 2023/24 tax year, HMRC has subsequently revised that figure upwards from 5.3 per cent to 6.0 per cent. It is still lower than the 7.5 per cent recorded in the 2005/06 tax year, although there has been some fluctuation in the intervening years.
A serious consideration of how tax obligations are managed will be needed to address the tax gap and this should be implemented by individuals and businesses before HMRC takes further action.
What is the key to tackling the tax gap?
There is no quick-fix solution for the tax gap. If there were, then HMRC would have deployed it.
What is important is understanding the causes and consequences of the tax gap and addressing what can be addressed.
Small businesses account for a disproportionately large share of the tax gap, making up a staggering 62 per cent of the value.
Mid-sized businesses account for a smaller share of the tax gap than they did at the start of the decade, falling from 13 per cent to eight per cent. Combined, small and mid-sized businesses account for 70 per cent of the value of the tax gap.
Small business owners may feel perplexed that they are responsible for more of the tax gap than large businesses, but the lack of engagement with tax is likely a large part of the reason.
Large businesses will generally have bigger tax bills, so if they fail to pay those bills, their contribution to the tax gap value would be significant.
However, large businesses generally have greater resources to devote to tax compliance, meaning they may be better placed to manage their tax obligations effectively. Seeking professional tax support makes compliance simpler by illustrating the full impact of tax on a budget as well as identifying ways that a business or individual could be more tax efficient.
Small businesses often lack the resources to have an internal team to assist with this and so face the choice of either paying more tax than they need to or breaching the rules and facing penalties.
We would prefer that tax is paid in full and on time, while ensuring that businesses are making use of legitimate opportunities to operate tax-efficiently. Our expert team can work alongside your business to review your position and make you aware of your obligations.
Rather than shying away from them, we will empower you to operate in a tax-efficient way so that your tax bill is manageable.
Once you have gained greater control over your tax bill, paying it will feel more natural as you will be confident that no mistakes have been made and that penalties are not waiting around the corner.
Tax compliance is a deeply serious issue and the tax gap indicates that error and fraud are too persistent.
The Government has announced measures expected to raise an additional £10 billion a year by 2029/30 as part of its efforts to close the tax gap, and this is likely to mean continued investment in HMRC’s compliance activity. We will advise you on changes to tax legislation and regulations and handle things for you, helping to ensure that your compliance remains up to date as the rules change.
Now is the time to be confidently tax compliant. Get in touch with our team today.