The gap between the amount of tax HMRC expects to collect and what is actually paid has reached a record £59.2 billion, highlighting the continuing challenge of tackling tax non-compliance across the UK.
According to HMRC's latest estimates, the tax gap for the 2024/25 tax year stands at 6.4% of total tax liabilities. While the tax authority collected £865.2 billion—equivalent to 93.6% of all tax due—the remaining shortfall represents the highest cash figure since records began.
The tax gap measures the difference between the amount of tax that should, in theory, be paid and the amount ultimately received by HMRC. It includes losses arising from errors, tax avoidance, evasion, the hidden economy and unpaid debts.
Although the cash value has increased, HMRC notes that the percentage tax gap has fallen over the longer term. Since measurements began in 2005/06, the gap has reduced from 7.5% to 6.4%, despite fluctuations from year to year.
HMRC says the figures reflect an increasingly complex tax environment, where traditional compliance and enforcement methods are becoming less effective. As tax affairs become more digital and business structures more varied, identifying and addressing non-compliance presents a growing challenge.
The latest figures come as the government pursues an ambitious target of reducing the tax gap by £10 billion by the end of the decade through greater compliance activity, increased digital reporting and expanded data-sharing powers.
However, some tax professionals have questioned whether that objective is achievable.
Ellen Milner, Director of Public Policy at the Chartered Institute of Taxation (CIOT), said the tax gap has proved persistently difficult to reduce despite the efforts of successive governments. She also noted that the estimates themselves are subject to considerable uncertainty, raising questions about how heavily they should be relied upon when shaping policy or compliance activity.
The figures are routinely revised as more information becomes available, meaning the estimates evolve over time. Nevertheless, they remain one of the key indicators used by HMRC to assess compliance risks and inform future tax policy.
For taxpayers and businesses, the latest report reinforces the direction of travel. As HMRC continues its drive to narrow the tax gap, greater emphasis is likely to be placed on digital reporting, earlier intervention and enhanced compliance checks across the tax system.
