Unpaid taxes owed by Britain's richest individuals surged by 44% to £3.6 billion in the last financial year, exceeding the shortfall from all other individual taxpayers combined, according to new HMRC figures. Critics have branded the rise 'abhorrent' as the government grapples with a widening public finance deficit.
Record Tax Gap Amid Government Borrowing
The overall tax gap—the difference between taxes owed and collected—rose to £59.2 billion, equivalent to 6.4% of all taxes due. This amount is nearly as much as the £60 billion the government spent on defense last year. The shortfall comes as the government borrowed £132 billion last year to cover spending needs, a key challenge for the next prime minister, with Andy Burnham emerging as a leading frontrunner to replace Sir Keir Starmer.
HMRC attributes the gap to various factors, including calculation errors, tax avoidance (legal but contrary to rules), illegal tax evasion, and criminal fraud. For wealthy individuals—the top 2% of taxpayers—the tax gap jumped from £2.5 billion to £3.6 billion, with over 70% represented by a tax agent.
Criticism and Calls for Action
Caitlin Boswell, deputy director at Tax Justice UK, said: '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.' She added: '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.'
Mike Lewis, director at TaxWatch, noted: '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.' He highlighted that the Chancellor promised to raise nearly £9 billion extra annually within three years through measures to shrink the gap, calling today's figures a stark reminder of the challenge.
Small Business Tax Gap Dominates
Small businesses account for more than 60% of all missing tax revenue. Paul Monaghan, chief executive of the Fair Tax Foundation, described the overall tax gap jump as 'mind-blowing,' having risen by 60% over the last five years. He said: 'The tired old mantra of ‘big business bad, small business good’ has never looked more infantile. There are good and bad actors in businesses of all sizes. This large and growing small business tax gap is the culmination of a whole series of small business tax scandals, everything from phoenixing on the high-street, through to disguised remuneration and fraudulent R&D claims. Robust action is needed, if only to allow diligent law-abiding small businesses to have a fair chance to compete.'
