The UK’s estimated tax gap, the difference between the tax expected to be paid and what was actually paid, was 6.4% for the 2024-2025 tax year.
HM Revenue and Customs (HMRC) collected £865.2 billion, representing 93.6% of all tax due, which means around £59.2 billion remained unpaid. The 6.4% gap is an increase on 6% recorded in 2023-24.
Unpaid tax from small businesses accounted for 62% of the gap in 2024-25, with corporation tax half of tax.
In other findings, corporation tax accounted for a 35% share of the overall gap, while failure to take reasonable care due to carelessness or negligence (35%) was the largest “behavioural risk”, followed by error (16%) and tax evasion (12%).
Previous years’ tax gap estimates have also been amended.
The figure for 2023-2024 has increased from 5.3% (£46.8 billion) to 6% (£52.8 billion), and the data for the 2022-2023 tax year has again been revised upwards from 4.8% in 2024, to 5.7% in 2025, and to 6.6% in 2026.
Oli Harcourt, senior director at Taxfix, said:
“It’s not surprising that small businesses are accounting for nearly two‑thirds of the UK’s overall tax gap given how complex the current system has become. Rather than placing blame on them, the focus should be on making it easier for small businesses to comply in the first place.”
“Just last month, inconsistencies were identified in HMRC’s new AI chatbot, risking the spread of misleading information to well‑intentioned taxpayers. It is another example in a long list – from long call centre wait times, confusing jargon on the website and closed helplines – of HMRC making it hard for taxpayers to access basic support.
“On top of this, the system has become more complicated for hundreds of thousands of taxpayers following the introduction of Making Tax Digital.
“Closing the tax gap is a crucial priority, but to do so HMRC must identify the factors driving small businesses’ ‘failure to take reasonable care’. Simplifying the system that is growing ever more complex needs to be higher on the to-do list.”
JP Marks, HMRC chief executive and first permanent secretary, said:
“Today’s estimates reflect the changing world in which HMRC operates, where it is becoming more difficult to tackle non-compliance through traditional approaches alone.
“That is why our aim is a well-designed modern tax system that makes it easier to get things right first time and harder to get things wrong, and which allows us to respond effectively to non-compliance and tackle criminal activity.”
The government’s 2025 spending review allocated £1.7 billion to HMRC over four years to fund an additional 5,500 compliance and 2,400 debt management staff to tackle non-compliance with tax rules.