HMRC says missing £59.2bn due to small businesses not paying tax

New figures from HMRC reveal small businesses make up 62% of customers not paying enough, and that corporation tax is the main shortfall. 

HM Revenues and Customs has today published the latest figures on the UK tax gap estimate, which is the difference between the amount of tax it expected to be paid in a given year and the amount that actually came in. For the year 2024-25, the difference was 6.4%  – the equivalent of £59.2bn in unpaid taxes. 

HMRC collected £865.2bn in that year-long period, and notes that the gap has fallen from 7.5% since records began in 2005-06.  

The bulk of the gap is down to businesses not paying appropriate levels of tax. Some 35% of the gap is due to unpaid corporation tax, while the largest single ‘customer group’ in the gap is small businesses, which make up 62% of the whole. 

About half the tax gap of small businesses is the result of unpaid corporation tax.  

The reasons given for not paying are failure to take reasonable care due to careless or negligence (35%), followed be error (16%) and evasion (12%). 

To tackle unpaid tax, the government’s 2005 spending review allocated £1.7bn to HMRC over four years to fund an additional 5,500 compliance and 2,400 debt management staff. Altogether,  measures to close the tax gap announced by the government since the autumn Budget in 2024 are expected to raise a further £10bn a year by 2029-30. 

JP Marks, Chief Executive and First Permanent Secretary of HMRC, says: ‘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. 

‘Measuring the tax gap helps us track long-term trends, which influence our policies and compliance strategy, allowing us to focus our efforts in the right places. In 2024-25, we collected and protected a record £48bn in compliance yield. This is money that would have gone unpaid without our intervention.’