“The estimated tax gap has increased slightly – up by 0.4 percentage points – compared to last year’s estimates. While the tax gap has remained broadly stable in recent years, there have been marginal year-on-year increases, including for small businesses and corporation tax.
“We support reasonable and proportionate government efforts to reduce the tax gap. It’s disappointing to see an increase when it looked to be on a long-term downward trend.
“The share of the overall tax gap attributed to small businesses has risen in recent years, from 40% in 2017/18 to 62% in 2024/25.
“The estimated figures also suggest that more than half (55%) of small companies may be submitting incorrect tax returns.
“We urge the Government to ensure that any future tax measures are properly targeted and reasonable to ensure that small businesses, in particular, do not face a disproportionate administrative burden.
“To support overall economic growth and improve productivity, the Government should look to simplify legislation, streamline tax returns, improve tax guidance and put more efficient systems in place to reduce the volume and complexity of the UK tax system. An improvement in HMRC service quality would also help these taxpayers meet their obligations right from the start and could reduce this error-driven portion of the tax gap significantly.”
ENDS
Notes to editors:
It’s important to remember that HMRC tax gap figures are only an estimate and subject to various amendments as better data and/or methodologies become available. The tax gap report is a tool to help decision making and should not be seen as definitive evidence upon which to base tax policy decisions.
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* includes parent companies. Source: ICAEW member data March 2026, Interbrand, Best Global Brands 2025.
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