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Tax Gap 2024-25 estimated at 6.4%

ended 24. June 2026

The tax gap estimate – the difference between what UK tax is expected to be paid and was actually paid – was 6.4% for the 2024 to 2025 tax year, provisional figures published today (23 June 2026) show.

HM Revenue and Customs (HMRC) collected £865.2 billion in 2024 to 2025, representing 93.6% of all tax due. This means an estimated £59.2 billion was unpaid that tax year.

Key findings from the latest estimates show:

  • Corporation Tax accounts for a 35% share of the total tax gap.
  • small businesses continue to represent the largest customer group of the tax gap (62%).
  • around half of the small business tax gap is for Corporation Tax.
  • failure to take reasonable care (35%) – due to carelessness or negligence - remains the largest behavioural risk to the tax gap, followed by error (16%) and evasion (12%).

Keen to get views specifically on why small businesses make up most of the tax gap (brutal fiscal climate, etc?) and why corporation tax makes up such a large percentage of the tax gap? Is this because Corporation Tax is often used as a cashflow tool / overdraft by businesses but then, when it's due, they don't have all the funds available to pay it? 

4 responses from the Newspage community

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Editor
Nouran Moustafa
Practice Principal & IFA at Roxton Wealth
Small businesses make up most of the tax gap because they face pressure and complexity. A large company has finance teams, tax departments, systems and advisers watching deadlines. A small business owner is the sales team, operations director, HR department and finance manager all at once.

That does not excuse poor record keeping or careless returns, but it explains why “failure to take reasonable care” is so high. The tax system is not built for someone trying to run a business at midnight after dealing with staff, customers, rent, VAT, payroll and rising costs.

Corporation Tax is also vulnerable because it is easy to treat as future money rather than money already owed. Businesses use cash to survive today: wages, stock, suppliers, rent and VAT all come first. Then the Corporation Tax bill arrives and the cash has gone.

The answer is not just tougher enforcement. It is earlier intervention, clearer guidance and better support before businesses turn tax into an unofficial overdraft
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Michelle Lawson
Director at Lawson Financial
These figures are the brutal truth of the crippling taxes levied to small businesses as they try to just make a living. Many don't make provisions for their tax bills so end up chasing their tails and borrowing from Peter to pay Paul. if you own a business it is important to make sure you know how to run it- this is part of cash flow. If things were made easier, less red tape and less punitive taxation this would alleviate the problems. HMRC also need to do better, I saw someone recently raise a query with them online to be given an expected response time of January 2027. There is a question to be raised about how much is sat in the ether waiting to be paid but with outstanding queries.
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Matthew Knight
Chief Freelance Officer at Freelancing.Support
There's already a steep learning curve when it comes to self-employment, and tax can feel overwhelming complex and anxiety-inducing for many, especially those in their first year. We desperately need simplification of taxation, along with better education and accessible and affordable tax advice for small businesses and freelancers, to help the "backbone of britain" bear any additional burden.
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Evren Ergin
Founder And Developer at ValuQ
The headline that small businesses are 62% of the tax gap reads as small firms dodging tax. The detail says otherwise: the biggest cause is failure to take reasonable care and error, not evasion. That is not a nation of crooks, it is a system too complex for people running a business single-handed to get right.

£59.2 billion went uncollected. The instinct will be tougher enforcement on small firms. The cheaper fix is to make compliance simple enough that an honest sole trader cannot get it wrong by accident. Blaming the smallest businesses for a complexity problem the rules created is the wrong lesson.