HMRC has revealed that the estimated tax gap for the 2020 to 2021 tax year is 5.1% – the second lowest recorded percentage – and is unchanged from the previous year.
The annual Measuring Tax Gaps publication estimates the difference between the total amount of tax expected to be paid and the total amount of tax actually paid during the financial year. The majority of taxpayers pay the tax that is owed.
In monetary terms, the tax gap for the 2020 to 2021 tax year is £32 billion. At 5.1%, there has been no change in the percentage tax gap compared to the previous year, although the monetary value has fallen by £2 billion from £34 billion in the 2019 to 2020 tax year.
The total tax due to be paid fell from £672 billion in 2019 to 2020 to £635 billion in 2020 to 2021 due to the economic impact of COVID-19.
Further findings for the 2020 to 2021 tax gap publication show:
- The tax gap for Income Tax, National Insurance contributions and Capital Gains Tax is 3.5% (£12.7 billion), representing 39.5% of the total tax gap by type of tax.
- The VAT gap shows a strong downward trend falling from 14.1% in 2005 to 2006 to 7.0% in 2020 to 2021.
- The Corporation Tax gap reduced from 11.5% in 2005 to 2006, to 9.2% in 2020 to 2021, reaching a low of 6.5% in 2011 to 2012, remaining broadly stable since 2014 to 2015.
- At 48% (£15.6 billion), small businesses represent the largest proportion of the tax gap by customer group, followed by criminals at 16% (£5.2 billion).
- Individuals account for 8% (£2.5 billion) of the overall tax gap and, at 5% (£1.5 billion), wealthy individuals have the smallest tax gap by customer group.
- Failure to take reasonable care (19%), criminal attacks (16%), non-payment (15%) and evasion (15%) are the main reasons for the tax gap by behaviour.
HMRC is the only tax authority in the world that measures and publishes an annual tax gap in such a comprehensive way – covering a single tax year for all the taxes, levies and duties it administers.
