Tax Gap Estimated at 5.3% for 2023-2024

• The tax gap for the 2023-2024 fiscal year is estimated at £46.8 billion
• The government aims to generate an additional £7.5 billion through initiatives to reduce the tax gap
• Small business non-compliance accounts for the largest portion of the gap

The tax gap, which represents the difference between the tax revenue expected and the amount actually collected, is estimated at 5.3% for the 2023-2024 tax year, according to figures published on 19 June 2025.

While HM Revenue and Customs (HMRC) successfully collected £829.2 billion during the year, £46.8 billion remained unpaid, equating to 94.7% of all tax due being received.

HMRC updates its tax gap estimates annually using the most recent data available. These figures may be revised as further information emerges. Consistent with standard practice, earlier tax gap estimates have been adjusted in this publication. Notably, the tax gap for the 2022-2023 tax year has been revised upwards from 4.8% (£39.8 billion) to 5.6% (£46.4 billion), reflecting improvements in data quality, the availability of newer information, and methodological changes.

Key insights from the latest tax gap assessment include:

• Small businesses contribute the largest share of the tax gap, representing 60%
• Corporation Tax makes up 40% of the overall tax gap
• Behavioural factors such as failure to take reasonable care (31%), errors (15%), and evasion (14%) are significant contributors to the gap

James Murray MP, Exchequer Secretary to the Treasury, highlighted three main priorities for HMRC: reducing the tax gap, enhancing customer service, and reforming and modernising the tax and customs system.

He stated: “Every pound of unpaid tax places a greater burden on compliant taxpayers and denies vital funding to public services.

“In our first year in government, we have launched plans to raise an additional £7.5 billion through the most ambitious effort yet to close the tax gap. We are committed to intensifying these efforts to ensure everyone pays their fair share and support the Government’s Plan for Change.”

HMRC’s Making Tax Digital (MTD) initiative is playing a crucial role in minimising tax losses caused by errors and lack of due care. By the conclusion of the 2029-2030 tax year, MTD for VAT is projected to boost tax revenues by over £4 billion by reducing inaccuracies. The rollout of MTD for Income Tax, scheduled for April 2026, is expected to generate a further £1.95 billion in revenue by the end of the 2029-2030 period.

As part of the Spending Review 2025, £1.7 billion will be allocated to HMRC over four years to support the recruitment of 5,500 additional compliance officers and 2,400 debt management personnel. These resources will help ensure more tax owed is collected to fund public services. Measures announced at the Autumn Budget 2024 and Spring Statement 2025 aim to raise an additional £7.5 billion in revenue through efforts to close the tax gap.