The government has announced plans to raise an additional £7.5 billion by stepping up efforts to close the tax gap - the difference between the tax HMRC expects to collect and what is actually paid.
Figures published on 19 June show that £46.8 billion in tax went unpaid in the 2023-24 tax year. That’s 5.3% of the total tax due, slightly up from previous estimates.
Small Businesses Under the Spotlight
The data reveals that small business non-compliance accounts for 60% of the total tax gap, with Corporation Tax accounting for 40%. The most common causes are:
- Failure to take reasonable care (31%)
- Error (15%)
- Tax evasion (14%)
As a result, HMRC is intensifying compliance work - particularly within the small business sector - with a clear aim to improve accuracy, reduce mistakes, and clamp down on evasion.
What's Changing?
The government has committed £1.7 billion over four years to fund more HMRC staff, including 5,500 compliance officers and 2,400 debt management roles.
Meanwhile, HMRC’s Making Tax Digital (MTD) programme continues to expand. It’s expected to generate £4 billion in additional VAT over the next four years by reducing errors. MTD for Income Tax comes into force from April 2026, and this is forecast to raise £1.95 billion in additional tax revenue by 2030.
What This Means for Your Business
With HMRC stepping up compliance efforts, now is the time to make sure your business accounts and tax affairs are in order.
One of the biggest changes on the horizon is Making Tax Digital (MTD) for Income Tax, due to start in April 2026. Initially, it will affect anyone who earns over £50,000 from self-employment or property income. However, in future years this limit will drop to £30,000 and then £20,000 by April 2028.
Under MTD, you’ll need to:
- Keep digital records of your income and expenses
- Submit quarterly updates to HMRC using MTD-compatible software
- File an annual final declaration
This is a major shift in how tax is reported - and planning ahead is essential to avoid disruption.
While HMRC says the majority of taxpayers pay what they owe, the pressure is clearly growing to close gaps and improve standards - particularly among smaller businesses.
If you’re unsure whether your current systems and processes meet HMRC’s expectations or want to get ahead of the MTD changes coming in 2026, please give us a call. We would be happy to help you!
See: https://www.gov.uk/government/news/tax-gap-estimated-at-53