Responding to today’s Comprehensive Spending Review (Wednesday 11 June 2025), TaxWatch Director Mike Lewis said:
With the Chancellor’s commitment to paying for day-to-day spending only through tax receipts, shrinking the £40 billion tax gap and £38 billion of outstanding tax debts is going to be critical for making today’s Spending Review numbers add up. HMRC has been allocated an extra £2.1 billion to modernise and recruit. But overall, from this year to the end of this Parliament, the department has today been given a real-term budget cut of 1.5 percent annually.
To tackle the tax gap, the Chancellor has promised 5,500 new HMRC compliance staff and 2,400 new debt management staff by 2029. In real terms, however, HMRC’s day-to-day spending will only increase by 0.7% annually to 2028/9. This is below this year’s civil service pay deal, suggesting headcount cuts are still possible elsewhere.
HMRC’s staffing already fell by 4 percent last year. Call-wait times have tripled since Covid. And in the next 12 months it will have to deliver the biggest change in a generation to how self-employed people and sole traders do their taxes. It’s a department wrestling with legacy systems, which won’t be helped by today’s 24 percent annual cut in its capital spending to 2030: by far the largest cut to any department’s capital budget.
On HMRC’s value for money, Mike Lewis said:
Despite HMRC’s challenges, investment in tax collection is still some of the best-spent money for increasing public revenues and giving certainty to taxpayers. Every pound that HMRC spent last year ensuring companies and individuals pay their taxes generated £17.45 in due taxes collected or protected. For spending on large companies’ tax compliance, that figure rose to £46.33. Chasing just one single wealthy taxpayer’s unpaid taxes brought in £2.5bn of extra revenue between 2022-24. That’s larger than the overspend by all NHS provider trusts in those years.
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Analysis and notes
1. TaxWatch produces an annual report on UK tax administration: ‘The State of Tax Administration’ (SOTA). SOTA 2024 contains more statistics on how HMRC functions and collects UK tax.
2. The June 2025 Comprehensive Spending Review provides for an overall HMRC Departmental Expenditure Limit (DEL) i.e. budget for predictable spending, of £6.8 billion in 2025/6, rising to £7.3 billion in 2026/7 and then falling to £6.9 billion in 2028/9. This represents real-term annual budget growth of -1.5% between 2025/6 and 2028/9. This total DEL figure comprises (1) Resource DEL or recurrent spending of £5.9 billion (2025/6), rising to £6.4 billion (2028/9), representing real-term annual growth of 0.7%; and (2) Capital DEL of £0.9 billion (2025/6) falling to just £0.3 billion (2029/30), representing real-term annual growth of -24.3%.
3. The number of full-time equivalent (FTE) HMRC staff fell from 63,738 (2022/23) to 61,186 (2023/24). Staffing levels are nonetheless higher than the low point of 57,304 FTE staff in 2018/19. 2024/25 staffing figures are expected in July 2025. In the 2024 Budget, the Chancellor promised to recruit 5000 new HMRC compliance staff and 1800 new debt management staff by 2029. The Spring Statement increased these figures by a further 500 and 600 respectively.
4. The ‘tax debt balance’ represents taxes correctly declared and assessed, but not yet collected by HMRC. Debt in cash terms rose during Covid-19, with taxpayers offered additional time to pay, especially for VAT. Significant amounts of old tax debt have been written off as uncollectable. Debt ‘available for pursuit’ is tax debt that HMRC regards as potentially collectable: at December 2024 (the latest available figure) it stood at £38.4bn:
4. ‘Making Tax Digital’ is HMRC’s flagship transformation programme for tax returns. Delayed from 2024, from April 2026 sole traders and others (such as landlords) who pay income tax through self-assessment will have to comply with Making Tax Digital if they have incomes over £50,000, and those with lower incomes from 2027 or 2028. Making Tax Digital will require millions of taxpayers for the first time to keep ongoing electronic records, purchase and use specialist commercial software to report their tax liabilities, and submit quarterly updates.
5. HMRC customer call volumes have fallen by over 10 percent since prior to Covid (41.63 million calls in 2019/20, 36.74 million in 2023/24). Nonetheless over that period, the length of time taken to answer calls (average ‘speed of answer’) has more than tripled, from 6m39s (2019/20) to 23m14s (2023/24). In April-June 2024 that rose to 27m02s, though it fell again in Oct-Dec 2024 to 18m47s.
6. HMRC ‘compliance yield’ (an estimate of the additional revenues that HMRC considers it has generated and the revenue losses it has prevented through its work to ensure taxpayers pay the right amount of tax due) fell during the Covid pandemic, but has been rising again in recent years:
7. HMRC publishes figures for ‘compliance yield’ and ‘compliance spend’ for different categories of taxpayer (2023/24 figures are here). We can use these figures to produce an approximate estimate of the ‘return on investment’ for HMRC’s compliance efforts with regard to different taxpayer categories:
8. In the Spring Statement 2025, the Chancellor promised that “[a]s part of the overall investment in HMRC resourcing, HMRC is overhauling its approach to offshore tax non‑compliance by the wealthy.” The National Audit Office (NAO) reported in May 2025 that within HMRC’s casework focusing on the tax compliance of ‘wealthy individuals’ (those earning more than £200,000 a year, or with assets over £2 million, in any of the last three years), offshore non-compliance accounted for less than 5% of casework. It also found that “[t]he compliance yield reported by HMRC’s wealthy team nearly doubled from £0.8 billion in 2019-20 to £1.5 billion in 2023-24, nearly twice the level it expected at the start of the year. HMRC said the team has collected yield from a large case with a value of £2.5 billion which was processed over the years 2022, 2023 and 2024.”
