HM Revenue & Customs (HMRC) data released today, June 23, shows the tax gap has jumped to £59.2 billion, representing 6.4% of all tax owed. This marks a £6.4 billion increase from the previous year, delivering a stark wake-up call for the Labour government.
Government Revenue Plans at Risk
The government had previously pledged to raise an extra £8.8 billion annually by 2029 by cracking down on tax dodging to fund public services. With the gap widening instead of shrinking, critics argue those economic plans are now under threat. The amount of tax dodged by the country's top 2% of wealthy individuals increased significantly, from £2.5 billion to £3.6 billion over the past year.
Small Businesses Account for Largest Share
Small businesses account for the largest single chunk of the gap at 62%, though HMRC notes that nearly half of that is due to carelessness or genuine errors rather than deliberate cheating.
Mike Lewis, Director at TaxWatch, said: “The untold story of this government’s economic plans is that they’ve bet the house on closing the tax gap. But today’s figures show a significantly worse picture than we saw last year. The tax gap has been rising since 2017-18, and HMRC thinks it increased by over £6 billion in this government’s first year in office. The Chancellor has promised that in just three years time it will be raising nearly £9 billion extra annually thanks to measures to shrink the tax gap. Those measures are the government’s third biggest revenue-raising policy. Today’s figures show how far they still have to go.”
Concerns Over Wealthiest Tax Avoidance
Caitlin Boswell, Deputy Director at Tax Justice UK, added: “It’s a massive worry that the tax gap for the wealthiest has increased over the past year, at the same time the Chancellor promised to crack down on it. So it’s even more concerning that HMRC still won’t publish the real tax gap for wealth held overseas by the richest and most powerful people in Britain. With wealth inequality spiralling and ordinary people across the UK struggling to make ends meet, it’s abhorrent that the super-rich are dodging paying their fair share. It’s robbing the country of the investment it needs. Any incoming Prime Minister and Chancellor must recognise the size of this problem and address it head on to make the tax system fair and raise revenue that could make genuine improvements to people’s lives.”
