New Making Tax Digital rules key to closing £46.8bn tax gap, says Treasury
- Perry Richardson
- Jun 19
- 2 min read
Updated: Jun 20
The tax gap for 2023 to 2024 has been estimated at 5.3%, equating to £46.8 billion in unpaid tax, according to new figures released by HMRC. Despite the shortfall, the department collected £829.2 billion in tax over the year, accounting for 94.7% of tax due.
Updated calculations also show a revised tax gap of 5.6% for the previous 2022 to 2023 period, up from 4.8%, after improvements in data and methodology were applied. The figures underline the scale of tax not reaching the Exchequer due to various causes.
Small businesses remain the largest contributor to the gap, responsible for around 60% of the total. Corporation Tax accounts for 40% of the shortfall. The main behavioural causes have been identified as failure to take reasonable care (31%), error (15%), and evasion (14%).
In response, the Government has reaffirmed its focus on tackling these issues. Exchequer Secretary to the Treasury, James Murray MP, highlighted three key areas for HMRC: reducing the tax gap, improving customer service, and updating tax systems.
Central to these efforts is the continued rollout of Making Tax Digital (MTD). The programme is designed to reduce the number of mistakes made in tax submissions through the use of digital systems. MTD for VAT is expected to bring in more than £4 billion in additional revenue by 2030. From April 2026, MTD for Income Tax will be introduced and is forecast to generate a further £1.95 billion over the same period.
HMRC is also receiving £1.7 billion in funding over four years to recruit an additional 7,900 staff across compliance and debt management teams. This is part of a wider effort to secure more of the tax that is owed.
Combined with measures announced at the Autumn Budget 2024 and Spring Statement 2025, the Government expects to raise £7.5 billion in additional revenue.
Mr Murray said that uncollected tax places a greater strain on taxpayers who do pay, and limits funding for public services. He stated the Government intends to go further in enforcing tax compliance and delivering its wider reform agenda.
Mr Murray said: “Every pound of tax uncollected puts a greater burden on honest taxpayers and deprives our public services of vital funding.
“In our first year in office, we have set out plans to raise an extra £7.5 billion through the most ambitious ever package to close the tax gap. We are determined to go further and faster to make sure everyone pays their fair share, and help to deliver our Government’s Plan for Change.”
