The UK tax hole held regular at 5.3% in 2023–24, translating to £46.8 billion in unpaid taxes, in line with the most recent HMRC statistics.
Whereas the share has remained broadly secure over latest years, the form of the hole is shifting—and never in methods many anticipated.
Company Tax has now overtaken all different classes to account for 40% of the whole tax hole, up from simply 24% 5 years in the past.
The rise is pushed primarily by small companies, who now contribute a disproportionate 60% share of the whole tax hole, in line with HMRC’s up to date segmentation.
In the meantime, VAT—historically the most important contributor—has fallen to 19% of the hole, down from 31% in 2019–20. The VAT hole itself has halved since 2005–06, falling from 13.8% to simply 5.0% immediately.
That is the primary time Company Tax has taken the lead place within the breakdown, elevating questions concerning the effectiveness of compliance methods focusing on the company sector.
Inside Company Tax, small companies alone contributed an estimated £14.7 billion shortfall, with an astonishing 40.1% tax hole on this group.
In distinction, the Revenue Tax, Nationwide Insurance coverage, and Capital Positive aspects Tax (IT, NICs, and CGT) hole has dropped to 3.0%, down from 5.3% a decade in the past.
PAYE compliance stays excessive, with gaps underneath 1% for many employer sizes—besides massive companies, which present a 1.1% hole and a “very excessive” uncertainty score in HMRC’s methodology.
The most important particular single hole stays with Self Evaluation enterprise taxpayers, with a 22.7% estimated hole and £5.8 billion misplaced income, suggesting that unincorporated companies stay a persistent threat.
Regardless of the headline determine of 94.7% tax compliance, absolutely the tax hole has grown by 44% since 2005–06, as complete theoretical liabilities have doubled from £437.7 billion to £876.0 billion.
The info additionally exhibits that 79% of this yr’s hole estimate depends on methodologies rated as having “medium” uncertainty, a notable improve from 56% in 2024’s version.
As digitalisation accelerates and Making Tax Digital for Revenue Tax looms in 2026, the focus will doubtless intensify on small corporations and unincorporated merchants.
For HMRC, the problem lies not simply in enforcement, however in creating responsive coverage that displays the truth of a shifting taxpayer panorama.
