Tax gap falls to lowest recorded rate

13 Jul 2020

The tax gap fell to an estimated 4.7% for the 2018/19 fiscal year, its lowest recorded rate, according to the latest data from HMRC.

The tax gap is the difference between tax that should be paid and what is actually paid. HMRC said there is a long-term downwards trend from the figure of 7.5% estimated in 2005/06.

HMRC collected £628 billion in tax revenue in 2018/19, which it said represents over 95% of all taxes due.

According to the tax authority, the falling gap is a result of efforts to improve the tax administration system and make it easier for taxpayers to pay, as well as initiatives such as Making Tax Digital (MTD) for businesses.

More than 1.4 million businesses have signed up to MTD, which helps them reduce errors and see, in close to real time, the health of their finances. This includes around 280,000 businesses below the VAT threshold who have joined voluntarily.

Commenting on the data, Jim Harra, Chief Executive of HMRC, said: 'More than 95% of the tax due was paid in 2018/19. HMRC's aim is for everyone to pay the tax that is due, no matter who they are.

'Our role is increasingly about making it straightforward for taxpayers to get it right first time, while also tackling the minority who deliberately set out to cheat the system. I'm pleased that we're now able to share more information about who pays what.'