HMRC publish 2019/20 tax gap analysis
The tax gap for the 2019/20 tax year is 5.3% according to statistics recently published by HM Revenue and Customs (HMRC).
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.
This year’s estimated tax gap at 5.3% represents £35 billion compared to 5% in the 2018/19 tax year, which represents £33 billion in monetary terms.
Nearly 95% of the tax due was paid in 2019/20 and HMRC has seen an increase in total revenue paid year on year. Taxpayers paid more than £633.4 billion in tax during 2019/20. This highlights how the vast majority of taxpayers are paying the correct amount of tax.
Jim Harra, HMRC’s Chief Executive and First Permanent Secretary, said:
“It is encouraging to see such a large proportion of businesses and individuals meeting their tax obligations. We want to help everyone get their tax right, which will help fund our vital public services like the NHS and emergency services.”
Findings from the Measuring Tax Gaps bulletin show:
- there has been a long-term reduction in the overall tax gap, falling from 7.5% in 2005/06 to 5.3% in 2019/20;
- the total tax gap for Value Added Tax (VAT) is £12.3 billion. The statistics show there has been a long-term reduction for the VAT gap from 14.0% in 2005/06 to 8.4% in 2019/20. However, it has increased from 7.0% in tax year 2018/19;
- 43% (£15.1 billion) of the tax gap is attributed to small businesses, whereas wealthy customers and individuals account for the smallest share of the tax gap at 4% (£1.5 billion) and 7% (£2.6 billion) respectively;
- ‘failure to take reasonable care’ accounts for the largest proportion of the tax gap at 19% (£6.7 billion), whereas avoidance accounts for the smallest proportion of the tax gap at 4% (£1.5 billion);
- the Inheritance Tax gap has decreased from an estimated £425 million (7.4%) in 2018/19 to £350 million (6.3%) in 2019/20;
These statistics show the tax gap for 2019/20. Any impact of the COVID-19 lockdown and economic downturn on the tax gap is likely to be first seen in the tax year 2020/21, which will be published in next year’s Measuring Tax Gaps publication.