Low tax gap results in £71 billion for UK public services


The tax gap for 2016/17 is 5.7%, HM Revenue and Customs (HMRC) confirmed today. Had the tax gap remained at its 2005/06 level the UK would have lost £71 billion in revenue destined for public services.

The tax gap is the difference between the tax that should be paid to HMRC and the actual tax that has been paid. Keeping the tax gap consistently low is a result of HMRC’s work to help customers get things right from the start, and the department’s sustained efforts to tackle evasion and avoidance.

The tax gap trend shows a long-term decline – it has reduced from 7.3% in 2005/06 to an estimated 5.7% in 2016/17, or £33 billion. This is the same percentage tax gap as for 2015/16, which has been revised down from last year’s estimate of 6%.

Key findings from the Measuring the Tax Gap publication include; small businesses made up the largest proportion of unpaid tax by customer group at £13.7 billion; taxpayer errors and failure to take reasonable care made up £9.2 billion of unpaid taxes by behaviour, while criminal attacks made up £5.4 billion; income Tax, National Insurance Contributions, and Capital Gains Tax made up the largest proportion of the tax gap by tax type at £7.9 billion for 2016-17, equivalent to 16.4% of Self Assessment liabilities; and the VAT gap showed a declining trend over time, falling from 12.5% in 2005-06 to 8.9% in 2016-17.

Jon Thompson, HMRC’s Chief Executive, said: “The UK is the only country in the world to regularly publish their tax gap in detail and at 5.7%, it remains at its lowest for five years. I am pleased that the downward trend shows HMRC and HM Treasury’s continued hard work to tackle evasion and avoidance is working.

“HMRC is also working hard to help taxpayers get their tax right by offering support and investing in digital services to improve businesses’ record keeping and reduce errors.”