Tackling the tax gap is back in vogue. (If it ever went out of style).

Boosting tax revenues without raising taxes is appealing to any government, but especially to one that has big new plans but has inherited strict fiscal rules. Day 3 of the Burnham administration saw Downing Street announce plans to offer pubs and clubs a 20 percent business rates cut, to be funded by (existing) plans to crack down on VAT evasion by foreign sellers on online marketplaces like eBay or Amazon, and by denying tax reliefs to ‘high street harms’ poster-boys like vape shops.

In the coming months, and in the first Burnham/Heaney budget, we can expect more such mining of the tax gap – the difference between the tax that taxpayers owe in theory, and what they pay in practice.

In this, our third long-read piece on the 2026 tax gap statistics, we take a look at two underexamined areas of the tax gap: wealthy individuals and the largest corporate taxpayers.

You can also read our two previous pieces on recent trends in the tax gap, and on the massive and poorly understood small business gap. In our final tax gap piece next week, we’ll take a look at one of the tax gap’s mysteries: the ‘offshore tax gap’, a number which HMRC refuses to disclose, representing unpaid tax on foreign income and assets that UK taxpayers conceal or forget.

Billionaires aren’t multinationals

For a tax administration, wealthy individuals and large businesses offer similar kinds of compliance and revenue opportunities. Both are a relatively small and well-known taxpayer population with a growing tax gap, as we’ll see below. That means that it’s possible to get more revenues with a smaller number of larger-yielding interventions compared to a much larger population, such as non-wealthy individuals or small businesses. The latter may be less tax-compliant as a group, but will individually owe much less tax.

Both large companies and very wealthy individuals are also more inherently international, meaning that international tax agreements – rarely scrutinized properly by Parliament in the way that domestic tax measures are – can have outsized impacts on HMRC’s ability to stop avoidance and evasion.

Understandably, therefore, HMRC is currently thinking about applying to billionaires some of the cooperative, bespoke approaches to tax compliance that they already take with the biggest multinationals.

But we also need to learn lessons from what hasn’t worked so well with big business tax compliance. There will always be a non-compliant minority. Promises of suspended penalties, or ceasefires in enquiries, may build confidence with mega-taxpayers that are sceptical of HMRC. But powers and penalties need to be real and visible to the non-compliant cohort to make cooperative compliance by the rest a rational choice.

Finally, cooperative compliance relies upon incentives. We should recognize that multinationals and billionaires don’t have entirely the same pressures and motivations. Multinationals’ tax affairs are much more visible than those of individuals. Big companies have to worry about customer reputation, or the aversion of their investors and shareholders to the large contingent liabilities that prolonged tax disputes can create on their balance sheets.  A HNWI may simply not have these ‘stakeholder’ pressures, while their tax affairs are likely to remain entirely publicly invisible.

So which lessons are transferable from large business tax compliance to making the wealthiest pay their taxes – and which are not?

Wealthy individuals

HMRC defines wealthy individuals as those earning more than £200,000, or with assets of £2 million or more, in any of the last three years. In 2025-26 this covered approximately the top 3 percent of individual taxpayers. Income and wealth concentration means that this relatively small group pay around 25 percent of the personal tax take.

Tax non-compliance by the wealthy is often regarded as relatively low and stable. The wealthy tax gap constitutes around 0.2% of wealthy individuals’ theoretical tax liabilities, and that proportion hasn’t changed much in the last 20 years.

However, revisions to previous years’ tax gap statistics, published in June, suggest that in absolute terms, the amount of wealthy individuals’ due taxes going unpaid each year has actually been rising significantly since the pandemic, from around £1.6 billion to £3.6 billion. For the first time since HMRC started measuring tax gaps, its estimate of wealthy taxpayers’ unpaid taxes is now greater than for all other 39 million individual taxpayers combined.

And this is before we factor in the possibility, as the National Audit Office believes, that the wealthy tax gap may be a significant underestimate, based on the fact that the increase in HMRC’s annual compliance yield from this population regularly exceeds the annual tax gap estimate by several billion pounds.

A comparatively large and rising tax gap in a small taxpayer population presents an obvious opportunity. A single wealthy compliance case can generate massive revenues: HMRC brought in £650 million in 2023 from just one taxpayer, Bernie Ecclestone, who had hidden money for decades in Singapore trusts. (HMRC’s windfall, ironically, earned Ecclestone a place on the Sunday Times’ hero list of top UK taxpayers that year). Last year the NAO revealed an even bigger case: a single wealthy compliance case – which may have involved multiple taxpayers – brought in £2.5bn of extra revenue between 2022-24.

Compare this to the necessary but hard slog of tackling tax return errors and small-scale tax evasion by hundreds of thousands of micro-businesses, one at a time.

And indeed Chancellor Rachel Reeves already committed to recruiting 400 new staff to tackle “wealthy offshore non-compliance”. This would grow the wealthy compliance team by around 40 percent.

But the bigger question is what these new staff and resources should do. HMRC’s definition of ‘wealthy individuals’ ranges from the merely very-well-paid to some of the richest people in the world. Each end of this spectrum will have dramatically different tax liabilities and arrangements. Unusually amongst OECD tax authorities, HMRC disbanded its ‘High Net Worth’ team in 2017, which had focused on those with assets of over £10 million, and folded the team into its larger ‘affluence’ unit. HMRC has justified its unusually broad ‘wealthy’ definition by saying that

its definition of wealthy individuals created a relatively stable population and represents the point at which taxpayers consider more structured, complex tax arrangements.

But in fact the numbers of people falling into the category are not stable – they’re rising rapidly. 1.3 million taxpayers met the ‘wealthy individual’ definition in 2025-26 – an increase of over 60 percent since 2021-22, compared to other individual taxpayers whose numbers have increased by around 22 percent during that time. Meanwhile at the top end of the scale, the Public Accounts Committee last year criticized HMRC for not knowing how many billionaires were UK taxpayers.

The important point is not setting an arbitrary wealth threshold at a certain number of zeros, but segmenting wealthy taxpayers so that (say) a globally-mobile oligarch, a UK-born large-scale landowner, and a London-based hedge fund manager, are prioritized according to their very different risk profiles; and are tackled with the right tools, expertise and data.

HMRC has promised to say how it’s meeting that challenge later in 2026, when it is due to publish a new plan to tackle wealthy non-compliance. The tax authority has said that this will include an:

emerging refreshed population model and the details of ongoing work to better understand contribution of wealthy individuals and the entities they control to the overall tax gap.

HMRC is consulting admirably widely on its wealthy compliance plan, and it’s a real opportunity to do things differently.

One big (if perennial) idea is to recruit people from the rarified ‘wealth management’ industry – trust lawyers, family office staff – to help unpick the complex tax affairs of the wealthiest. Similar attempts in the past have failed to tempt wealth managers to turn gamekeepers on a civil service salary. HMRC reports that since last April it has recruited “over 20 external experts from outside the organisation” to advise on offshore wealthy non-compliance, but doesn’t say exactly what expertise or experience these new staff have. In any case, as the Ecclestone case shows, often what such complex cases require is not a ‘White Collar‘-style outsider, but the right information; and seasoned, institutionally-supported investigators to follow that information.

Another big idea, this time promoted by the OECD and the IMF, is to extend to the ultra-wealthy the kind of individualized, ‘concierge’ approach that HMRC currently takes with the largest multinationals. Dubbed the ‘Cooperative Compliance’ approach, each mega-taxpayer would be assigned an individual manager within HMRC’s Wealthy Directorate – an enhanced version of the Customer Compliance Managers (CCM) who already oversee caseloads of individual taxpayers and mid-sized businesses with complex tax affairs. The CCM gains in-depth knowledge of the taxpayer’s affairs. The taxpayer agrees to be more transparent with the tax authority in return for greater certainty over some areas of their tax affairs that may be considered exempt from further scrutiny.

In the abstract, at least, this makes a lot of sense. Its advocates argue that it builds trust, tackles problems upstream, and avoids costly conflictual disputes. Its critics, however, counter that it can lead to favourable treatment of the wealthiest and most powerful taxpayers, and at worst to the kinds of ‘sweetheart deals’ that HMRC was accused of in the 2010s. The NAO’s recent glowing report on large business compliance found that beefed-up oversight of tax settlements now prevents such opaque deals, though there remain questions about the balance of carrots and sticks (see below).

Cooperative compliance is also very staffing-intensive. As of last year, HMRC’s wealthy compliance team had around 100 ‘Customer Compliance Managers’ (CCMs). Each are already assigned to around 150 high-worth taxpayers. If wealthy CCMs are to work as intensively with the very wealthiest individuals as large business CCMs do with multinational companies, HMRC will inevitably require more of them.

Importantly: international proposals to extend ‘cooperative compliance’ to the ultra-wealthy see it only as one part of a package which also includes tougher legislation against aggressive tax planning, and stronger audits to spot and penalise cross-border evasion and avoidance.

So how is it going on the ‘sticks’ side? We learned from the NAO last year that the proportion of wealthy compliance cases ending with a penalty, and the number of those penalties themselves, have collapsed since the pandemic:

Both the number of penalties, and their average value (£7,500 in 2018/19, £12,700 in 2023/24) look underwhelming. We shouldn’t read too much into annual variations: it’s a small taxpayer population and cases may take several years to complete. Nonetheless if this overall trend has continued since 2023-24, especially against the backdrop of a rapidly rising wealthy tax gap, then the case for adding even more carrots and even fewer sticks through the ‘cooperative compliance’ approach needs to be extremely well-evidenced.

Of course, many inside and outside HMRC would regard measuring tax evasion deterrence via penalties as irredeemably old-fashioned. As with other taxpayer groups, HMRC’s efforts to get the wealthiest to pay their due taxes is moving ever further towards ‘upstream’ approaches – the complex of prompts, nudges, education campaigns and legislative changes that seek to prevent non-compliance before it takes place. This is laudable: prevention is better, and usually cheaper, than the cure. We need to make sure, though, that it doesn’t change incentives for those concerted evaders who don’t respond to preventive approaches. And recent TaxWatch investigations into HMRC’s tax disputes with some of the largest corporate taxpayers contain a cautionary tale here.

Large businesses

The large business gap is another unfashionable part of the tax gap where according to popular wisdom all is going well, but the data doesn’t entirely bear this out. Once a sector where outright tax avoidance was rife, earlier this year the NAO praised HMRC’s efforts over the last decade to get the right taxes from these 2000 biggest corporate groups. HMRC’s “efficient and effective approach to ensuring large businesses remain tax compliant….has made a significant contribution to reducing the tax gap”, the NAO said, providing support for HMRC’s view that “large businesses are generally compliant and…cases of egregious behaviour are rare.” On this telling, HMRC’s ‘cooperative compliance’ approach — with its individualized, ‘concierge’ service to large corporates, and its emphasis on transparency and early intervention over dispute and penalty — has transformed the tax compliance of this key constituency, by or through which 40 percent of the tax take gets paid.

HMRC’s own tax gap statistics, though, tell a slightly different story. A long decline of the large business tax gap in percentage terms since 2006 has stalled since 2020. With post-pandemic corporate profits rocketing and becoming more concentrated, this means that that in absolute terms the large business gap has risen sharply: increasing by over 10 percent since pre-pandemic levels, an increase of around £2.5 billion in nominal terms. Most of this increase appears to be accounted for by corporation tax.

If most large businesses are now more compliant than in the past, then a stubborn minority, it seems, are not playing ball with HMRC. And the tax liabilities of these hold-outs is getting ever larger. There’s now over £70 billion of tax at stake in large businesses’ disputed tax bills – a figure which has risen sharply in the last four years, bucking previous trends:

How does HMRC square this major increase in the extent to which it is disagreeing with large businesses’ tax positions, with the idea that large business non-compliance is not increasing?

Partly, it seems, by a conceptual recategorization. The tax gap already excludes many kinds of profit-shifting and tax minimization called out by campaigners and journalists as ‘tax dodging’ but which are squarely within current law or accepted practice. That’s up to HMRC, of course. But it also seems that the ‘avoidance’ category of the large business tax gap – which HMRC assesses to be just 5% of the gap, or less than £300 million in 2023/24 – doesn’t include all of what HMRC elsewhere explicitly labels as “artificial and contrived” arrangements, or contraventions of explicit “anti-avoidance” rules.

For instance: in May TaxWatch took a forensic look at just one of HMRC’s large business dispute: its 15-year-long efforts to challenge multi-million pound annual payments to Switzerland by the London trading arm of commodities multinational Glencore. HMRC claims that these transactions are the kinds of “artificial and contrived” arrangements caught by the UK’s Diverted Profits Tax, and that they also contravene targeted anti-avoidance rules (TAARs) against “disguised distributions” of profits via derivatives contracts, and a rule against “avoidance schemes involving the transfer of corporate profits”. (Glencore denies tax avoidance strongly). In 2024 and 2025, HMRC raised additional tax assessments on Glencore totalling £1.15 billion, covering the three tax years from 2019 to 2022.

Since legislation and HMRC manuals explicitly use the word “avoidance” to describe this kind of behaviour, you would think it would clearly be included in the ‘avoidance’ category of the large business tax gap. Yet 5 percent of HMRC’s estimated large business tax gap over these years – roughly HMRC’s estimate of the ‘avoidance’ component of the large business gap – is just £700 million: less than the tax bill on what HMRC classifies as tax avoidance by just one multinational company.

We don’t know, of course, how much of HMRC’s additional Glencore assessments are corporation tax (at 19 percent), Diverted Profits Tax (at 25 percent in those years), and interest. (Glencore itself told us they don’t include penalties). Nonetheless taking the maximal position that Glencore’s £1.15bn additional tax bill is all Diverted Profits Tax plus 8% interest would still mean that the underlying tax that HMRC believes is missing likely equalled or exceeded the entire avoidance portion of the large business tax gap in those years. And there will be other cases of this kind.

Something isn’t being measured or recognized correctly here. More importantly, an organizational ethos that believes that large business tax avoidance is essentially ‘solved’ can allow tools against persistent non-compliance to go unused, or be given away.

• HMRC has never used its toughest non-criminal corporate sanctions (the ‘persistently uncooperative large business regime’) against any company since it was introduced in 2016, though there are clear cases of what HMRC labels persistent non-compliance.
• 71 percent of penalties on large businesses are suspended to incentivize future compliance – despite a rising large business tax gap and the rapidly increasing scale of long-term tax disputes with the biggest businesses.
• The Diverted Profits Tax – a ‘penalty as tax’ that allows HMRC to charge up-front tax on what it regards as artificial profit-shifting – has undoubtedly safeguarded UK tax, as in the Glencore case. But the government is also deliberately making it easier for multinational taxpayers to neutralize their Diverted Profits Tax (DPT) bills in the future. A little-scrutinised measure in the 2026 Finance Act ensures that they are able to appeal DPT assessments to closed-door negotiations with other tax authorities, and in many cases then to secret binding arbitration, rather than have UK tribunals rule on appeals, as happens with other tax disputes. In Glencore’s case, such cross-border negotiations have delayed the settlement of the dispute for over six years, while Glencore’s multi-million pound annual payments to Switzerland have simply continued. And just this week Glencore confirmed what we reported in May: that thanks to an additional cross-border tax agreement with Swiss tax authorities that HMRC agreed without parliamentary scrutiny in 2021, Glencore is now planning to convert these negotiations to a potentially all-or-nothing secret arbitration process in which HMRC, if it loses, may have to pay back its entire £1 billion of previous Diverted Profits Tax receipts.

What gets measured gets done. Making tax non-compliance by certain groups invisible in statistics helps to justify ‘de-fanging’ compliance.

Equally: cooperation with taxpayers is always preferable to conflict. But as the intractability of the Glencore case and the rising burden of large business tax disputes both show, cooperative compliance only works if taxpayers know that there are meaningful powers and penalties to deal with the inevitable minority that still won’t comply.

What could ‘country-by-country reporting’ look like for billionaires?

Finally, one area where efforts to gather taxes from errant HNWIs could learn from multinational tax compliance is transparency.

Recent years have seen a quiet revolution in the information that big companies disclose to tax authorities. The biggest and best known innovation is ‘country by country reporting’: a geographical breakdown of where big businesses book taxable income and profits, allowing comparison with indicators of where they locate their business activities (like turnover, assets and headcount). This reporting was first conceived by campaigners as a public tax transparency tool – to highlight if a multinational has most of its profits in a tax haven but no staff there, for instance. After years of rejecting the idea, the OECD then took it up in 2015 as a non-public risk assessment tool. ‘Country by country reports’ have since become a standard requirement by tax authorities in many countries, including the UK, along with a ‘Master File’ showing the group’s international structure and details of its internal tax arrangements.

This year, under the ‘Pillar 2’ global minimum tax agreed in 2021, multinationals have also started to report to HMRC where they have income and profits in other countries that are taxed below 15 percent: their so-called “GLoBE Information Returns”. And finally, in 2028, multinationals will start telling HMRC about certain cross-border transactions with a potential tax impact, under the new ‘International Controlled Transactions Schedule’.

Large businesses also typically make a lot of public disclosures in published annual reports and accounts filed at company registries.

Ultra-wealthy individuals may have complex cross-border tax affairs, like multinational companies, but have none of these reporting requirements. They obviously have to disclose nothing publicly about their financial affairs. And recent discussions on HMRC’s emerging ‘wealthy compliance’ plan have underlined that HNWIs and their advisers tend to take a ‘don’t ask don’t tell’ approach to HMRC in private too. They will typically disclose nothing they don’t have to unless asked. The standard self-assessment tax return – even with additional pages for foreign income – has actually got slimmer in recent years. Both HMRC and taxpayers largely take the approach that if the taxpayer believes income or gains from companies, trusts, property and financial assets are outside the scope of UK tax (something that HMRC quite often disagrees about) they simply won’t be disclosed at all – and certainly the tax return asks no detailed questions about the underlying assets and their values. (It’s for this reason that HMRC couldn’t tell the Public Accounts Committee last year how many billionaires there were amongst UK taxpayers and how much tax they pay).

In practice, this approach often results in more, not fewer, demands for disclosure. Anecdotally, for instance, HMRC’s standard taxpayer questionnaire to determine the domicile of an internationally-mobile individual has in the past stretched to around 100 questions. There’s annoyance, delay, cost and frustration on both sides.

Likewise the information that HMRC receives from third parties about wealthy individuals has improved greatly, but remains partial. Since 2017, for example, HMRC has received information automatically from over 100 jurisdictions about UK taxpayers’ offshore bank and financial accounts: an initiative originally hailed by the OECD as “an end to bank secrecy”. But over half of the money in these reported accounts is held via trusts and companies whose ownership may be difficult to untangle. Offshore banks also fail to gather unique ‘taxpayer identification’ information for one in five of such reported offshore accounts, making it harder for HMRC to definitively match the offshore account to a UK taxpayer.

How would we cut through all this opacity? Tax agents and advisers are already required to report a growing range of tax arrangements designed to avoid or minimise tax for their clients, even legally; but these are specific structured tax schemes, not a general map of taxpayers income and assets. And there are regular legal challenges about what falls within the scope of such disclosures.

We could imagine instead a much more straightforward requirement, less prone to judgement: a ‘country by country reporting’ standard for the very wealthiest individuals. This could be a detailed template requiring them to disclose to HMRC, under strict confidentiality, basic details about all their companies, trusts, partnerships, bank accounts, and assets around the world, whether or not they believe the income or gains from these assets are UK taxable.

Disclosing income on such a report wouldn’t automatically mean that it had to be included in their taxable income on their UK tax return. But it would help end the need for HMRC and HNWIs to play cat-and-mouse games about discovering potentially taxable income and assets, especially overseas. This will become ever more important with the end of the non-domicile regime, with more of the wealthiest taxpayers’ previously undisclosed offshore assets coming within the scope of UK tax.

And there could be carrots for taxpayers too: for instance, they could be offered automatic inoculation from penalties — which can be up to 200% of the tax due — for ‘failure to notify’, deliberately withholding information or ‘offshore moves’, if they involve income, assets and entities disclosed on the wealthy individual’s country-by-country report.

Conclusion: reasons to be cheerful

The wealthy and large business tax gaps get less political and media attention than the tax affairs of vape shops and online marketplaces. But the figures we’ve presented here suggests that there are still significant and even growing areas of non-compliance in both cohorts.

Equally, gains to be had in these areas might look smaller than the giant (and undeniably urgent) £37 billion of small business taxes that HMRC believes is going unpaid. But in these smaller taxpayer cohorts there may also be some easier and less resource-intensive wins. As examples like Glencore and Bernie Ecclestone show, there are still some big fish swimming in these murkier backwaters of the tax gap.

Compliance efforts for each taxpayer group has something to teach the other: from cooperative compliance to international disclosure regimes. But to learn the right lessons, it’s important not just to look at what’s worked, but at what hasn’t.

Photo by Alen Kajtezovic on Unsplash