The tax gap is the difference between what HMRC expects the total tax take to be and the actual tax received. In its latest annual update on 19 June 2025, HMRC published its estimates for the tax gap for 2023/24 and revised its estimates for earlier years.

The tax gap has fallen slightly as a percentage of tax liabilities, from 5.6% for 2022/23 to 5.3% for 2023/24. However, it is worth noting that the initial estimate of the tax gap for 2022/23 was 4.8%. HMRC acknowledges that the “tax gap estimates are uncertain and subject to revision”. 

Taking a longer-term view, the tax gap has been broadly stable at around 5.6% in recent years. This is above the low point of 5.1% recorded for 2017/18 and 2018/19 and significantly down from 7.4% for 2005/06. In a press release issued alongside the figures, the government refers to its plans to raise £7.5bn through measures announced in the Autumn Budget and Spring Statement to close the tax gap. Given that the tax gap has remained relatively stable despite earlier attempts to close it, these figures may raise questions about whether that target is achievable.

The tax gap for most taxes has followed a downward trend since 2005/06. However, the percentage tax gap for corporation tax had increased significantly in recent years, peaking at 17.6% for 2021/22. It has since fallen and now stands at 15.8% for 2023/24. In absolute terms, the corporation tax gap for 2023/24 was £18.6bn, of which £14.7bn related to small businesses.

The share of the tax gap attributed to small businesses has increased in recent years, from 48% of the overall tax gap for 2019/20 to 60% for 2023/24. Over the same period, the share of the tax gap attributed to wealthy individuals has remained around 5%.

In a report published on 16 May 2025, the National Audit Office suggested that HMRC may have underestimated underlying levels of non-compliance among the wealthy. In response to the report’s findings, Frank Haskew, Head of Taxation Strategy, ICAEW, commented at the time that HMRC may wish to reconsider its focus on the SME tax gap and adopt a more holistic approach.

What ICAEW views as criminal behaviour is subdivided by HMRC into evasion, criminal attacks and the hidden economy. These have been combined as ‘criminal behaviour’ in the chart below and are equivalent to 28% of the tax gap, up from 27% for 2022/23. 

HMRC provided details of the threat it faces from phishing and other attacks in recent correspondence with Parliament’s Treasury Committee. It is interesting to note that the percentage attributable to criminal attacks was at least three percentage points higher in 2019/20 and 2020/21 than in subsequent years.

Failure to take reasonable care remains the largest behavioural cause of the tax gap.

In recent years, non-payment had increased as a share of the tax gap but has dropped between 2022/23 and 2023/24, from 14% to 12%. We looked at HMRC’s efforts to reduce tax debt in a TAXline article published in May 2025.