HMRC's Tax Gap Hits £59.2bn: What It Means for Ordinary Taxpayers

HMRC's newly published Measuring Tax Gaps 2026 edition shows the "tax gap" — the difference between what should theoretically be collected and what actually is — rose to 6.4% of total tax liabilities for 2024/25, up from 5.3% the previous year. In cash terms that's £59.2bn left uncollected, according to analysis from ICAEW and PAYadvice.UK.

What's driving the increase

The figure marks a £6.4bn jump on the year before, and the previous year's estimate has itself been revised upwards by £12.8bn, according to TaxWatch UK. Notably, the report shows the share of the gap attributable to wealthy individuals has increased from 4% to 6% — a detail highlighted by Tax Justice UK, which has long argued HMRC under-resources enforcement against complex, high-value avoidance.

Despite the widening gap, HMRC still collected £865.2bn in 2024/25 — 93.6% of everything theoretically owed, per the official statistics. Small business error and failure to take reasonable care remain the largest single components of the gap, rather than deliberate evasion.

Why this matters if you're not "the taxman's target"

A widening tax gap tends to translate into more compliance activity for ordinary taxpayers and small businesses — more automated cross-checks against bank, platform and payroll data, and a tighter approach to penalties and enquiries. The government has already pledged to raise a further £8.8bn a year by 2029/30 specifically from closing the gap, per Tax Justice UK's analysis, which means increased HMRC data-matching (including the side-hustle platform reporting rules already in force) is likely to intensify rather than ease off.

Separately, HMRC's own 2025/26 annual report shows it missed five of its six headline performance targets for the year, though it did meet its call-answering target for the first time since 2017/18 — a sign that service levels and enforcement pressure are both being reshaped at once.

What it means for you practically

If you're self-employed, run a side hustle, or have rental or investment income, expect HMRC's systems to be better than ever at matching your bank, platform and payroll data against what you declare. Keeping clean digital records — something Making Tax Digital is designed to enforce — is now less about compliance box-ticking and more about avoiding becoming a data-matching flag.

Key Numbers

• 6.4% — the UK tax gap for 2024/25, as a share of total theoretical tax liability
• £59.2bn — the cash value of the 2024/25 tax gap
• £865.2bn — total tax HMRC actually collected in 2024/25
• £8.8bn — additional annual revenue the government aims to raise by 2029/30 by closing the gap

Sources

• gov.uk: Measuring Tax Gaps 2026 edition
• ICAEW: Tax gap widens to 6.4%
• PAYadvice.UK: Tax Gap 2024-25 at 6.4%
• Tax Justice UK: Tax Gap 2026 press release
• TaxWatch UK: The tax gap is getting worse
• ICAEW: Opinions mixed on HMRC performance for 2025/26

Educational content only — not financial advice.