Tax gap estimated at 5.3% in 2019/20 tax year

ended 16. September 2021

The ‘tax gap’ is shrinking, according to an Office for National statistics report published today, entitled 'Measuring tax gaps'.

The 'tax gap' is the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid.

It amounted to £35bn, or 5.3% in the 2019/20 tax year. In the 2005/06 tax year, the tax gap was estimated to be 7.5%.

Experts respond

3 responses from the Newspage community

"These figures show HMRC is heading in the right direction. After all, we all have a legal duty to pay tax. If you don’t pay the tax you owe, you should go to jail. It’s that simple. But remember, we also have the opportunity to structure our financial affairs, in 100% legal ways, which minimises the legal amount of tax we have to pay. I am constantly amazed at the number of people who don't do this. If Governments want us to pay more tax, they should change the law, not try to persuade us with a moral obligation."
"Closing the £35 billion tax gap is one of those supposed easy wins for the Government, like achieving 'efficiency savings'. Every government claims that they can make things better by closing the tax gap or achieving efficiency savings. However, the tax gap has averaged around £30 billion for the past 15 years so I don't think it's going to be closed completely any time soon. "Perhaps most the interesting thing in the figures was "Legal interpretation" costing £5.8 billion. Another way of reading this could be that Financial Advisers, Solicitors and Accountants save their clients £5.8 billion in unnecessary tax. Both are true, it just depends on which side of the fence you are sat, and our job is to be sat on the side of the client."
Star Quote
"This clearly shows HMRC are heading in the right direction and collecting more of the tax that is owed. The financial impact of the Covid-19 pandemic on Government finances will only drive the need to close this gap further, along with other measures to increase tax receipts such as the recently announced National Insurance increase to fund social care. The Covid-19 pandemic has clearly 'moved the goalposts' so I anticipate significant, possibly radical changes to the UK tax system in the next few years."