How big a problem is tax evasion?

Tales of high profile tax evaders often hit the headlines, and there’s a widespread perception that the country loses a significant amount of money each year to offshore havens, cash in hand work and hidden bank accounts. But how widespread is tax evasion, and how worried should we be?

We recently ran a poll on TikTok asking people whether they agreed with the statement “In the UK, we lose more tax to evasion than anything else”. The results were very close - 48% said this was true, while  only marginally more - 52% said it was false.

What is tax evasion?

Before we look at just how big a problem tax evasion is, it’s worth being clear about what we mean by it.

At it’s simplest, tax evasion is a deliberate attempt not to pay tax that is due. Examples might include purposefully not declaring taxable income to HMRC, or claiming a tax deduction for expenses which are not genuine. Tax evasion is illegal, and those found guilty face severe penalties and potentially criminal prosecution.

Tax evasion can sometimes be confused with tax avoidance. Unlike tax evasion, tax avoidance is not illegal. However, it involves bending the rules of the tax system to try to gain a tax advantage that Parliament never intended. This might include inserting contrived or artificial steps into transactions that serve no real purpose beyond securing a tax saving. HMRC have a number of powers and tools to tackle tax avoidance, especially the promotion of tax avoidance schemes.

Beyond tax evasion and avoidance there is tax planning – taking legal, legitimate steps to pay a lower amount of tax in line with the law. This includes claiming allowances and reliefs which a taxpayer is entitled to. For example, someone may choose to put money into an ISA, rather than a regular savings account, as interest on ISAs is exempt from income tax. This saves the individual some tax, but is in line with the law and perfectly acceptable (provided the individual is eligible for an ISA and meets any relevant conditions).

How widespread is tax evasion?

Returning to our poll, just under half of respondents said that we lose more tax to evasion in the UK than anything else. However, when we look at the statistics this isn’t the case.

Every year HMRC produces their ‘tax gap’ statistics. These compare the tax we actually collect each year, with the total theoretical amount we could collect.  The ‘tax gap’ figure is then further broken down by tax type, taxpayer group and behaviour to identify where we are losing tax revenue.

The total tax gap for 2023-24 (the latest year for which we have statistics) is calculated as 5.3%, or £46.8bn. However, only 14% of this total tax gap (£6.4bn) is thought to be due to evasion. The amount attributable to tax avoidance is also lower than might be expected, at 1% of the total tax gap (£0.7bn). 

So if tax evasion and avoidance are not the main sources of lost tax revenue in the UK, what is?  By far the largest contributor is taxpayers failing to take reasonable care, which makes up 31% of the total tax gap (£14.6bn).  A further 15% (£7.1bn) is lost to taxpayer errors.  Taken together, this would indicate that the main source of lost tax revenue in the UK is not evasion, but taxpayers simply getting things wrong.

What does this mean?

Whilst we should not ignore tax avoidance and evasion, and undoubtedly more could be done to tackle them, they are not as big a contributor to lost tax revenue as many may think.

This means that, in order to close the tax gap, we can’t just focus on avoidance and evasion, but need to support taxpayers to get their tax affairs right first time. Unfortunately, given the ever increasing complexity of the UK’s tax system, this is not an easy task.

To explore all the resources, daily content, and ways to get involved during Tax Awareness Week 2026, visit the Tax Awareness Week webpage - and watch out for new content being added every day throughout the week!