Small businesses behind two-thirds of Britain’s £59 billion tax shortfall
According to the latest figures from HM Revenue & Customs (HMRC), the Treasury faced a significant deficit of £59.2bn in unpaid taxes last year; small businesses accounted for almost two-thirds of the UK’s overall tax gap.
The tax gap, which measures the difference between the amount of tax expected to be paid and the tax actually collected, is estimated at 6.4 percent.
HMRC successfully collected a total of £865.2bn during the 2024-2025 tax year; this represents 93.6 percent of all tax due.
This latest deficit represents an increase on the previous year’s revised figure of £52.8bn, or 6 per cent.
HMRC estimates that small business non-compliance alone accounts for 62 per cent of the 2024-2025 tax gap, making them the largest contributors across all customer groups.
This was largely due to unpaid corporate taxes; The overall difference in this tax increased to 18.1% in the last year.
Corporate tax is paid on the profits made by businesses from trade, investments and asset sales.
The rate of tax paid depends on how much profit the company makes.
Failure to use reasonable care, whether through carelessness or negligence, remained the largest behavioral driver of unpaid tax, followed by error.
HMRC said tax evasion accounted for 12 per cent of last year’s tax gap.
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Quilter tax and financial planning expert Rachael Griffin said: “Closing even a small part of the £59.2 billion tax gap could play a meaningful role in supporting the public finances without the need for further headline tax increases.
“Improving the way the system works in practice, especially for small businesses and those new to self-regulation, could be as important as changes to tax rates in the coming months.
“Simplifying a tax system that continues to become more complex should be high on the to-do list.”
HMRC chief executive JP Marks said: “Today’s forecasts reflect the changing world in which HMRC operates, where it has become more difficult to tackle non-compliance with traditional approaches alone.
“So our goal is a well-designed modern tax system that makes it easier to do things right the first time and harder to get things wrong, allowing us to effectively address non-compliance and combat criminal activity.”
