Budget’s third-largest tax pledge relies on UK tax authority that is suffering from recruitment delays and unfinished IT systems
Just 26 of 6,700 extra compliance/debt staff promised by Chancellor are so far in post
Decision to retain tax on digital giants despite Trump pressure, but missed opportunities to tackle abused corporate reliefs as large as the child benefit budget
A fresh crackdown on tax evasion and non-compliance announced in today’s 2025 Autumn Budget relies on highly uncertain improvements to HMRC’s tax enforcement capabilities.
Today’s new measures to close the ‘tax gap’ are the Budget’s third-largest revenue-raising measure, after income tax threshold freezes and pension NIC changes. They are forecast to bring in an additional £2.6 billion by 2030-31.
Together with measures announced in Autumn 2024 and Spring 2025, the government is now expecting to raise £8.8 billion annually from improved tax compliance by 2029-30.
Yet the UK’s tax authority that must deliver this crackdown is already struggling with delayed recruitment, new taxpayer IT interfaces that don’t retain data, the deepest departmental capital spending cuts of any Whitehall department, and taxpayer confidence at a historic low, according to TaxWatch research. Just 26 of 6,700 new HMRC compliance and debt staff promised since Autumn 2024 are yet recruited and working in post, according to new figures obtained by TaxWatch via FOI.
TaxWatch Director Mike Lewis said:
The untold story of this Budget is that the Chancellor has already bet the house on boosting HMRC’s ability to chase tax dodgers.
Before this morning, the government was already hoping to deliver an unprecedented £6.4 billion of extra tax revenues a year in this way, through new staff and powers. The measures announced today increase that figure to £8.8 billion by 2029-30.
Yet only 0.4% of the staff that the Chancellor has promised to do this are yet in post. IT and comms systems are creaking. In some areas of tax compliance, like money hidden in offshore bank accounts, HMRC is benefiting from unprecedented data and disclosure, but still recovering less than half the amount of hidden tax liabilities in its own estimates.
The tax compliance plans announced today are welcome. But they require HMRC to train and retain more staff, and get systems working properly. So far this parliament that hasn’t been happening. It will take funding – and time.
New tax compliance crackdown won’t work if HMRC isn’t even using its current tools and resources
Today’s Budget promises new powers and resources yet again to close the £47bn annual ‘tax gap’ and reduce the £44bn tax debt balance.
New compliance measures in today’s Budget will target small business tax fraud, non-compliant tax advisers, and the scheme promoters that are central to mass-marketed tax avoidance, as today’s Loan Charge Review underlines. Yet figures collated by TaxWatch show that many of HMRC’s existing powers and penalties against the perpetrators, advisers and enablers of tax avoidance and evasion are barely being used:
- Just 310 people were prosecuted for tax fraud in 2024-25, less than half the pre-pandemic level.
- There have been fewer than 5 penalties against dishonest tax advisers since 2021-22, and none at all in 2024-25. HMRC has powers to name and shame such penalised advisers, but TaxWatch has found no instances of them ever doing so.
- Since 2017, companies can be prosecuted for failing to stop their employees from facilitating tax evasion: just one (relatively small) company has been charged under this offence so far, and their trial will not take place until 2027.
- HMRC imposed fewer than five penalties on adviser ‘enablers’ of tax avoidance schemes in each financial year from 2021-2 to 2023-4. A larger number of fines were issued in 2024-25 (180) but averaged just £9,055 each. HMRC also has the power to name and shame such ‘enablers’ of defeated schemes, but the current name/shame list contains no names of defeated scheme enablers at all.
Delivering this Budget’s tax compliance crackdown will also require new, trained and experienced staff. Yet the government’s flagship plan to boost HMRC’s compliance capacity is already behind schedule:
- The 2024 Budget and 2025 Spring Statement pledged funding for 5,500 new compliance staff and 1,200 new debt management personnel. These promised new staff are expected to bring in an extra £5bn annually by 2029-30.
- Yet figures obtained by TaxWatch via FOI in September 2025 showed that HMRC had recruited none of the promised new debt collectors yet, and only 744 new compliance staff — of which just 26 are actually trained and operational, just 0.4% of the target. The remainder are still in 18-month training pipelines.
HMRC capacity is already under strain
TaxWatch’s recent ‘State of Tax Administration 2025’ report shows:
- HMRC will overall see a real-term budget cut of 1.5 percent annually during this parliament. This includes annual capital spending cuts of over 24 percent: by far the deepest of any government department.
- The ‘tax debt balance’ – uncollected taxes owed by taxpayers – now stands at £43.8bn: double pre-pandemic levels. HMRC reduced it by only £0.6bn in 2024-25.
- Even the introduction of global agreements which reveal UK taxpayers’ offshore bank accounts to HMRC have yielded just £821m since 2018-19. This is less than 40 percent of the tax that HMRC estimates was due from this undeclared offshore account income.
- Only 52% of individuals who interacted with HMRC last year reported a good experience: an eight-year low.
- 5 million calls to HMRC (~20%) went unanswered in 2024-25, and taxpayers spent 1,186 years collectively waiting on hold last year.
- ‘Making Tax Digital’, HMRC’s flagship programme to boost tax compliance by requiring 3 million self-employed and landlords to do their taxes quarterly and digitally, is due to start in April 2026. But programme costs increased suddenly by 60 percent last year, expected benefits have dropped by £2 billion, and TaxWatch has found that around a fifth of the software systems to interface with taxpayers still cannot reliably retain data, meaning they cannot be fully tested.
Corporate tax: standing up to Trump pressure, but opportunities missed to tackle profit-shifting and purposeless reliefs
TaxWatch welcomes today’s announcement that the UK’s Digital Services Tax (DST) will be retained despite US threats.
TaxWatch calculates that the DST – paid only by the largest tech companies with £500m+ turnover globally and £25m from UK users – is set to generate tax revenues of between £4.4bn and £5.2bn over the course of this parliament. In the absence of a global ‘Pillar 1’ tax deal, retaining the DST ensures that the UK keeps the tax’s growing revenues, and reduces incentives for tech giants to shift profits into tax havens.
However, this Budget has once again failed to grasp the nettle of rationalising a set of corporate tax breaks and exemptions that now cost the Exchequer slightly more than the entire child benefit budget,[1] with limited discernible economic benefit and rampant abuse. These include:
- R&D credits: Today’s Budget documents include an update on plans for more advance approvals of R&D credits claims, but the regime remains highly vulnerable to “error and fraud…among the highest reported across all government spending programmes, including those administered in response to the COVID-19 pandemic”, according to the National Audit Office. Nearly 10% of claims are still erroneous or fraudulent, according to latest HMRC estimates. Claims have included football clubs claiming tax credits for players’ salaries by claiming that they were engaged in ‘nutritional research’, and a catering business claiming R&D relief for buying a refrigerator.
- The Patent Box regime, a tax relief costing the UK public purse £2.4bn annually, with a quarter going to just one company which has received £3.4 billion in ‘Patent Box’ tax relief intended to UK incentivise jobs and manufacturing, while it shut factories and shrunk its UK headcount by 25 percent, a TaxWatch investigation revealed. The Patent Box also incentivises large multinationals to shift profits from other countries as royalties, simply by registering a patent in the UK for products not developed here or made here.
[1] The combined annual exchequer cost of R&D credits, film tax credits and other creative reliefs, and the reduced ‘Patent Box’ tax rate, are expected to have been £13.5bn in 2024-25. Child benefit cost £13.3bn in 2024-25, according to the Office of Budget Responsibility.
Image: HM Treasury/Flickr CC BY-NC-ND 4.0
