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HMRC Will Report Its VAT Gap Less Often As It Widens

ended 17. July 2026

How often a shortfall is measured in public is how often it can be challenged. From autumn 2026, HMRC plans to stop publishing the two interim VAT gap estimates it produces during the year, the preliminary estimate each autumn and the second estimate each spring, and to report the figure only once, in its annual Measuring Tax Gaps release. The plan was set out in a gov.uk update on 9 July 2026, with stakeholders able to raise concerns until 3 September 2026.

It comes as the gap is widening. The VAT gap, the difference between the VAT HMRC believes is due and what it actually collects, reached £12.1bn (6.6% of the theoretical liability) in 2024-25, up from £10.3bn the year before, and the interim estimates now being dropped were the ones that flagged that rise early, coming in at £11.4bn then £11.9bn before the final figure. The VAT gap is not only fraud. It also captures error, non-payment and firms that go under before they pay.

So fewer public readings do not make the gap smaller or the response softer. A rising gap means more VAT checks, more nudge letters and more pressure through Making Tax Digital for VAT, now with two fewer moments a year to test whether the shortfall is real evasion or ordinary businesses struggling. The person who feels that is the VAT-registered small business owner reconciling returns every quarter, not the organised fraudster the headline number is meant to describe.

  1. Is reducing how often the VAT gap is published a sensible trim of duplicated statistics, or the wrong moment to say less about a gap that is growing?
  2. Who loses most from fewer in-year figures, and does less frequent measurement make it harder to tell whether a widening gap is fraud or honest businesses struggling?
  3. What should VAT-registered businesses take from this, and do you have a client whose VAT position this scrutiny would change? If so, please give as much colour and detail as possible.


 

2 responses from the Newspage community

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Editor
Harvey Dhillon
Founder & CEO at Zmartly
On HMRC's own figures the VAT gap reached £12.1bn in 2024-25, up from £10.3bn a year earlier, and from this autumn we will see that number two fewer times a year. HMRC currently estimates the VAT gap three times, a preliminary reading, a second estimate, then the annual figure, and it plans to keep only the annual one. Measuring a shortfall less often does not make it any smaller. It just leaves fewer moments to ask what is actually driving it. That matters, because the VAT gap is not only fraud. It also captures error, non-payment and firms that fold before they pay, so a rising gap tends to bring more checks and more nudge letters, and they land on the compliant. If you are VAT-registered, the change to watch is not the reporting, it is the enforcement it feeds. Keep your records clean and your returns reconciled monthly, because a widening gap means more scrutiny, not less, whatever HMRC now publishes.

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Editor
Nouran Moustafa
Practice Principal & IFA at Roxton Wealth
A tax gap is not a criminality score. It includes fraud, but also mistakes, unpaid liabilities and businesses collapsing before VAT is paid. Publishing it less often while it is rising risks replacing scrutiny with assumption.

The biggest loser is the small business owner, not the organised fraudster. They already reconcile quarterly returns, maintain digital records and manage VAT cash flow, yet may face more checks and nudge letters based on a headline that does not explain why the money is missing.

HMRC may call this efficient, but transparency should increase when enforcement pressure increases. VAT-registered businesses should tighten reconciliations, retain evidence for unusual transactions and challenge incorrect assumptions quickly. Cutting two public readings does not close the gap; it simply gives businesses and the public fewer chances to question what is driving it.