HMRC is recovering more missing tax from wealthy individuals than previously: £5.2 billion in 2023/24. But beneath the headlines: the tax this group is underpaying may be larger than previously thought, and is likely growing, while penalties for their non-compliance have plummeted.
***
The National Audit Office (NAO) – the nation’s financial watchdog – has been digging into whether the UK is “collecting the right tax from wealthy individuals“.1
The NAO’s answer to that question is out today.2 It’s generated two seemingly contradictory groups of headlines. First, “HMRC is getting more of the missing tax from wealthy individuals”.3 That’s true, in absolute terms. Second, “wealthy individuals could be dodging more of their taxes than previously thought”.4 From the NAO’s findings that also seems likely.
What’s the real story?
That official estimates clearly don’t have a good handle on how much tax revenue is missing from wealthy individuals – especially tax from income and assets hidden offshore. And the evidence from recent successes in tackling wealthy tax evasion suggests that these official estimates could be much too small.
First, the positive news: the ‘compliance yield’ of missing taxes recovered by cracking down on tax non-compliance by wealthy individuals is growing. In 2023/4 HMRC got £5.2bn of unpaid taxes by chasing this group. That’s a really significant sum. It also shows HMRC working smarter. They’re focusing on (some) bigger fish: cases investigated by HMRC’s ‘wealthy’ compliance teams have nearly halved from 15,569 (2018/9) to 8,807 (2023/4), but the average revenue from each case has nearly tripled, from £34,100 to £93,800.
The bad news, though, is that the problem itself is getting bigger. HMRC’s own estimate of annual taxes uncollected from this wealthy group (the ‘wealthy tax gap’) has risen since 2020 from £1.6bn to £1.9bn. And today’s NAO report finds that this could be a serious under-estimate.
Over the last 5 years, HMRC has been able to find £3bn more tax that wasn’t paid by wealthy individuals – comparing ‘compliance yields’ in 2023/24 (£5.2bn) to those in 2019/20 (£2.2bn).
Yet HMRC’s estimate of the ‘wealthy tax gap’ has remained under £2bn over that time.5 Something’s not right: as the NAO says, either
- Levels of tax non-compliance among the wealthy population are much greater than HMRC’s estimates; or
- wealthy individuals have become much less compliant, but HMRC “has then been successful in tackling the increase in non-compliance through its compliance activity, such that the amount of non-compliance it is unable to stop has remained the same”.
NAO’s tone suggests which one it thinks is more likely. But the bottom line is that official estimates of wealthy individuals’ underpaid taxes are certainly wrong, and probably too small.
HMRC also thinks that the kinds of things that make this group not pay its taxes (‘compliance risks’) are getting worse:
the net loss in tax revenue from the 19 key risks affecting wealthy individuals increased by 21% between 2020-21 and 2022-23, the latest data available. This compares with a 16% increase across all strategic risks (covering all taxpayer types)
And yet, unlike most other OECD countries, HMRC has abolished its unit of specialist investigators focused on ultra-wealthy individuals (those with assets over £10 million), despite the potential for such units to generate staggering revenue wins. (Chasing just one single wealthy taxpayer’s unpaid taxes, according to the NAO, brought in £2.5bn of extra revenue between 2022-24. That’s larger than the overspend by all NHS provider trusts in those years).6
Most strikingly, penalties issued to wealthy individuals who didn’t pay their due taxes plummeted in 2023/24 by three-quarters compared to the previous year:
At an average penalty of £12,700 (just 13 percent of the average unpaid tax recovered in each wealthy compliance case) that’s not a deterrent: its decent odds.
Meanwhile HMRC used its criminal powers to prosecute only 25 wealthy individuals in 2023/24. In total, HMRC told the Public Accounts Committee earlier this year, 101 wealthy taxpayers have been charged with tax crimes and are awaiting trial.7
This matches TaxWatch’s own research into HMRC’s civil and criminal powers to tackle the lawyers and advisers who design, sell and assist tax avoidance and evasion. We’ve found that these powers are barely being used either.
So while revenues from chasing wealthy individuals’ unpaid taxes may be up in absolute terms, there’s a serious risk that it pays not to pay your taxes. And that risk may be growing.
***
[1] Wealthy taxpayers, for HMRC, is quite a big group: everyone who earned more than £200,000 income or had more than £2 million assets in any of the last three years, encompassing around 850,000 people.
[2] National Audit office, Collecting the right tax from wealthy individuals, Session 2024-25, 16 May 2025, HC876, https://www.nao.org.uk/wp-content/uploads/2025/05/collecting-the-right-tax-from-wealthy-individuals.pdf
[3] Charlotte Gifford, Tax crackdown on ‘wealthy’ pockets £5bn for Reeves, Daily Telegraph, 16 May 2025, https://www.telegraph.co.uk/money/tax/hmrc-tax-crackdown-wealthy-pockets-rachel-reeves-5bn/
[4] Emma Agyemang, Tax dodging by rich could be ‘much greater than thought’, says UK audit office, Financial Times, 15 May 2025 https://www.ft.com/content/bdfdd795-5256-4adf-9fd2-17fc2d653219
[5] HMRC, Measuring Tax Gaps Tables, Table 1.4, updated 20 June 2024 https://www.gov.uk/government/statistics/measuring-tax-gaps-tables
[6] NHS provider deficits are back: how bad is the situation?, Nuffield Trust, 12 February 2025
[7] Evidence from Sir Jim Harra to Public Accounts Committee, 6 March 2025, https://committees.parliament.uk/oralevidence/15485/pdf/
***
Image: Timothy Valentine/Flickr CC BY-NC-SA 2.0
