Overdue payments of corporation tax, VAT and PAYE to HM Revenue & Customs (HMRC) reached £27.1 billion in the third quarter of 2025, a 138% increase on pre-pandemic times.
£3.8bn of the debt is sitting in 172,402 ‘Time To Pay’ agreements, HMRC‘s payment plan system for people struggling to pay their tax bill.
The data, revealed in a freedom of information request by financial and real estate advisory group BTG, showed overdue corporation tax (£6.1 billion) was 145% higher in Q3 2025 compared to the first free months of Q1 2020, overdue VAT (£12.4 billion) was 216% higher and overdue PAYE (£8.5 billion) overdue was 72% higher.
The overdue payments are spread across 2.26 million accounts.
Julie Palmer, partner and restructuring expert at BTG, said:
“Covid lockdowns put a halt on activity for many businesses and as HMRC granted VAT holidays the amount owed increased rapidly. Businesses soon approached the time when they had to start paying back, which many did. However, the figure has not reduced as much as hoped as inflation and interest rates increased and consumer confidence dragged.
“This climate has resulted in debts of corporation tax, VAT and PAYE increasing rapidly, with the figures having risen to around £27 billion from before the pandemic. It is not so much that the debt is high, it is that HMRC is taking action and demonstrating greater proactivity in recalling debt. This has been well documented and it is highly likely we will see a lot of these companies that are saddled with debt falling over.
“Carrying too much debt and not earning enough to repay that debt are symptoms of a ‘zombie’ company, which is unsustainable. There is a good chance that this combination of factors will see ‘zombie’ businesses fall over, but this activity can allow stronger businesses to take the market share that those businesses leave enabling them to grow.
“At the other end of the spectrum businesses that are succeeding are noting there are many opportunities for acquisition of strong, historic brands and stronger ideas. In some ways, if ‘zombie’ companies are acquired by better performing and funded ones then there is greater opportunity for improvements in productivity and job creation.”