Corporation tax non-compliance has become the dominant factor in the UK’s growing tax gap, accounting for 40% of the £46.8 billion shortfall in 2023–24, according to new HMRC figures. The corporation tax gap rose to 15.8%, the highest level in over a decade.
Small businesses are now the biggest contributors to the overall tax gap by customer group, making up 60% of the shortfall, up from 48% five years ago. HMRC attributed the trend largely to rising non-compliance in this segment.
Despite a slight improvement in overall tax compliance, with 94.7% of tax liabilities collected, the data highlights an increasingly uneven picture. The combined shortfall in income tax, national insurance, capital gains tax, and VAT has continued to decline. In contrast, corporation tax compliance is slipping.
Personal taxpayers and high-net-worth individuals now represent just 10% of the tax gap. Still, HMRC warned of a growing risk of accidental non-compliance due to more people being drawn into the tax system through frozen thresholds and reduced allowances.
The release comes amid heightened scrutiny of HMRC’s operations, following public service complaints and a major phishing incident that resulted in £49 million being stolen through compromised tax accounts. The Treasury has pledged to recover £7.5 billion through stricter compliance measures.
