What is the tax gap for 2022-23
The tax gap for the 2022-23 tax year has been published and is estimated to be
4.8% of total theoretical tax liabilities.
The tax gap is basically the difference between the amount of tax that should have been paid to HMRC and the amount of tax collected by the Exchequer. The gap includes tax that has been avoided in the UK’s black economy by criminal activities, and tax avoidance and evasion. However, it also includes simple errors made by taxpayers in calculating the tax they owe as well as outstanding tax due from businesses that have become insolvent.
In monetary terms, the tax gap is equivalent to lost tax of £39.8 billion. This means that HMRC collected 95.2% of all tax due.
What are the key findings from the 2024 Tax Gap report
The
key findings from HMRC’s Measuring the Tax Gap publication include:
- the tax gap for VAT reduced from 13.7% in 2005-06 to 4.9% in 2022-23;
- the tax gap for Income Tax, National Insurance contributions (NICs) and Capital Gains Tax gap reduced from 4.5% in 2005-06 to 3.0% in 2022-23;
- the tax gap for Corporation Tax increased from 11.4% in 2005-06 to 13.9% in 2022-23; and
- the tax gap for excise duties reduced from 8.3% in 2005-06 to 4.7% in 2022-23;
The largest components of the tax gap by tax type are the Corporation Tax gap and the Income Tax, NICs and Capital Gains Tax gap, both at a 34% share, followed by the VAT gap with a 20% share of the overall tax gap.
The tax gap from small businesses is the largest component of the tax gap by customer group at a 60% share in 2022-23. The tax gap from individuals, and wealthy individuals, each make up a low proportion of the tax gap at 5% each in 2022-23.