Tax gap: help small businesses get tax right, says ATT

Figures released by HMRC today reveal the UK tax gap is at an estimated 6.4% of total tax liabilities (£59.2 billion) in 2024-25, and that small businesses account for 62% of the total, making them by far the largest contributor to the difference between tax due and tax collected. 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%).

With HMRC continuing to collect more than 93% of tax revenues due, the remaining challenges around compliance are becoming increasingly concentrated among these smaller businesses, many of whom face significant administrative and regulatory burdens.

The ATT says more frontline support is needed for small businesses in getting their tax right, especially given the amount lost to failure to take reasonable care and error.

Emma Rawson, ATT’s Director of Public Policy, said:

"The latest figures underline the importance of tackling non-compliance, but they also show that enforcement alone will not close the tax gap. Small businesses account for the largest share of the tax gap, but many business owners are trying to comply with an increasingly complex tax system while managing the day-to-day demands of running a business.

"HMRC is already collecting more than 93% of the tax that is due. The challenge now is increasingly concentrated among smaller businesses, which means targeted support and intervention will be essential if the tax gap is to be reduced further.

"The fact that so much of the tax gap stems from error and failures to take reasonable care suggests there is significant scope to improve compliance through better support, clearer guidance and simpler processes.”

Notes:

1. Measuring tax gaps 2026 edition: tax gap estimates for 2024 to 2025.