Corporate report

HMRC's annual report and accounts 2024 to 2025: Financial review

Published 17 July 2025

This financial review covers our financial performance in 2024 to 2025, setting out our funding, what we spent our money on, trends within tax revenues and how we continued to ensure we use public money appropriately and responsibly.

“HMRC’s core purpose remains as important as ever. Every pound we collect is helping to power vital public services, such as the NHS and the Police — and I’m proud of the progress we’re making in doing this cost-effectively, improving compliance whilst increasingly becoming a digital-first organisation.

In 2024 to 2025, our expenditure of £6,562 million enabled us to generate £875.9 billion in tax revenue, pay out £27,775 million in support payments to customers and keep the tax gap low at 5.3%. It costs just half a penny to collect each pound of tax revenue and we delivered new and sustainable efficiencies of £216 million in 2024 to 2025.

Throughout the next year, we will continue building a more effective, agile and digitally focused HMRC, that underpins the government’s plans.”

Justin Holliday
Chief Finance Officer

Budgetary framework

HM Treasury sets the budgetary framework for government spending. Within this, we are given our own Supply Estimate, which sets our proposed maximum spending and is voted on by Parliament at the start of the financial year.

The total amount we spend as a government department is known as Total Managed Expenditure (TME). In 2024 to 2025, our TME was £38,517 million. This funding is subject to strict HM Treasury controls and consists of budgets voted by Parliament and budgets where appropriation is covered in other legislation (including tax credits, other reliefs and allowances and the National Insurance Fund).

Figure 10 shows how TME is split into Departmental Expenditure Limit (DEL) and Annually Managed Expenditure (AME) budgets, where DEL sets our budget for controllable expenditure and AME covers our more flexible budgets for volatile or demand-led expenditure.

Within our DEL budgets we have ringfences against some programmes where we receive budget for a specific policy measure, which we can only spend on that measure. This is referred to as the HM Treasury policy ringfence. Resource DEL (RDEL) includes day-to-day resource and administration costs, and Capital DEL (CDEL) is our investment expenditure.

AME spend may be unpredictable and is more challenging to control, so it requires careful monitoring. HM Treasury reviews these budgets annually and we base our forecast on published Office for Budget Responsibility data.

Figure 10: Our budgetary framework (note)

Note: Numbers may not to sum due to rounding.

What we spend our funding on

Table 1 and figure 11 show our spending pattern over the last 5 years split by spend type.

Table 1: 5-year trend on our spending (note)

Expenditure	2020-21 £ million	2021-22 £ million	2022-23 £ million	2023-24 £ million	2024-25 £ million
Resource DEL	4,795	5,717	6,329	6,502	5,834
Capital DEL	537	665	556	725	728
Total DEL	5,332	6,382	6,885	7,227	6,562

Figure 11: 5-year trend on spending — Total DEL (note)

Note: Numbers may appear not to sum due to rounding.

In 2024 to 2025 we spent £6,562 million total DEL, which included £4,446 million on our core operations, delivering the resources and systems we need to collect tax and maintain a low tax gap. This allowed us to deliver compliance yield this year of £48.0 billion [read more in figure 1: Compliance yield]. We have also invested in additional resource for customer service, which helped us to improve our telephony performance in 2024 to 2025, compared to 2023 to 2024 [read more in the section Telephony performance through the year].

We spent £603 million investing in the modernisation of our services to improve the customer experience, reduce burdens on business, and improve tax compliance. This activity also contributed £50 million in new efficiency savings through modernising our legacy IT estate and replacing existing IT contracts with new, more efficient services and suppliers [read more in the section How we delivered value for money].

Figure 12 shows our RDEL expenditure in 2024 to 2025 split by spend type. Our cost base is largely fixed, especially in the short term, leaving limited areas for managing our spend outside of staff costs.

Figure 12: Total HMRC Group RDEL expenditure in 2024 to 2025 by spend type (notes 1 to 4)

Notes:

1. Numbers may appear not to sum due to rounding.
2. HMRC Group includes VOA figures.
3. Other includes income.
4. Total excludes the Cost of Living Payments.

Variances between budget and expenditure

Table 2: 2024 to 2025 Financial performance (note)

Due to the amount of data presented, only part of the table below is visible. Please use the scrollbar at the bottom of the table to view all the columns.

Expenditure	Budget £ million	Expenditure £ million	Expenditure compared to budget %	Underspend on ringfences £ million	Position excluding ringfence underspend £ million	Position excluding ringfence underspend %
Resource DEL	6,052	5,834	-218	165	-54	-0.9%
Capital DEL	743	728	-15	8	-7	-0.9%
Total DEL	6,795	6,562	-233	173	-61	-0.9%

Note: Numbers may appear not to sum due to rounding.

Table 2 shows our financial performance in 2024 to 2025, where we underspent by £233 million, the equivalent of 3% of our Total Department Expenditure Limit (TDEL) budget. When excluding our budgets under HM Treasury policy ringfences (referenced in the Budgetary Framework section), we had an underspend of 0.9%.

Against our Resource DEL budget of £6,052 million, we underspent by £218 million. When excluding underspends in HMT ringfenced budgets, the underspend was £54 million (0.9%). This underspend was influenced by several factors, including variances in cost estimates, reductions in office running costs, lower than anticipated travel and subsistence expenses, and the lifting of certain programme ringfences in the second half of the year, which were not available for alternative use earlier.

Against our Capital DEL budget of £743 million, we underspent by £15 million. When excluding underspends in HMT ringfenced budgets, the underspend was £7 million (0.9%). The underspend was mainly attributable to project slippage, where the timeline for delivering some of our programmes changed, which altered the profile of our spending in 2024 to 2025.

Trends in Annually Managed Expenditure (AME)

In 2024 to 2025, we spent £27,775 million, against a budget of £31,723 million, on annually managed expenditure. This was an underspend of £3,947 million. Any underspend is returned to HM Treasury. Table 3 and figure 13 show our AME spending pattern, over the last 5 years split by spend type.

Overall, 48% of our AME expenditure was on Child Benefit payments, totalling £13,303 million in 2024 to 2025. Total payments have increased compared to the previous year, driven by the increase to the High Income Child Benefit Charge threshold that came into place from April 2024.

We spent £10,128 million on reliefs and allowances which includes Corporation Tax reliefs, primarily for research and development relief and film tax relief. This made up 36% of our AME expenditure.

Our AME budgets are more flexible as they provide funding for volatile or demand-led expenditure, which is more difficult to control. A key factor for our underspend was lower spending on tax credits due to the migration of claimants onto Universal Credit. There was also a slight underspend within Child Benefit, where expenditure was lower than we had forecast when the budget was set. Other reliefs and allowances related to Corporation Tax reliefs expenditure were also less than budgeted.

[Read more on AME expenditure in our Resource Accounts.]

Table 3: 5-year trend on our AME funding and expenditure (note)

Total Annually Managed Expenditure £ million	2020-21	2021-22	2022-23	2023-24	2024-25
Funding	165,126	59,069	38,162	36,380	31,723
Expenditure	119,309	51,319	33,930	33,274	27,775
Expenditure compared to budget %	-45,817	-7,750	-4,232	-3,105	-3,947

Note: Numbers may appear not to sum due to rounding

Figure 13: Total AME 5 year expenditure trend (note)

Note: Numbers may appear not to sum due to rounding.

How we delivered value for money

We have a duty to use public money responsibly and we demonstrate value for money in several ways — for example, by comparing the tax revenue we collect with the cost of collecting it and by achieving efficiency savings to reduce our costs.

Our progress in delivering efficiencies

We achieve sustainable efficiencies when we improve how we carry out a process or activity to deliver a permanent cost reduction, while maintaining or improving existing performance levels. Our track record of delivering efficiencies is strong. In the 5-year period since 2020 to 2021 we have delivered total sustainable efficiencies of £730 million — as a result, our costs are £730 million lower in 2024 to 2025 than they would otherwise have been.

Figure 14: 5-year view of cumulative sustainable efficiencies

In 2024 to 2025, the third and final year of the current Spending Review period, we delivered new sustainable efficiencies of £216 million. We achieved these, broadly, through delivering people and productivity improvements, modernising our IT systems, and by reducing the costs associated with maintaining our physical estate.

Modernising our IT estate and replacing existing IT contracts with new, more efficient services and suppliers delivered £50 million of efficiency savings in 2024 to 2025. We also saved £12 million by optimising our use of office space and sub-letting to other government departments. We delivered £154 million through people and productivity savings — for example, by tackling compliance risks more effectively.

Our Spending Review 2021 settlement required cumulative efficiency savings of £500 million per year from 2022 to 2023 to the end of 2024 to 2025. The impact of pressures such as inflation required us to find further savings to stay within budget, resulting in a revised target of £719 million by the end of 2024 to 2025, which includes one off savings. Against this target, we delivered final efficiencies and one-off savings of £724 million.

Four ways we delivered sustainable efficiencies

• our Single Customer Account (SCA) programme delivered efficiency savings of £13 million in 2024 to 2025, primarily due to speeding up accurate tax code notification for new starters, significantly reducing ‘pay shock’ where individuals receive much lower take home pay than expected — this has reduced the number of calls we’ve handled relating to incorrect new starter tax codes
• we delivered efficiency savings of £9 million through standardising forms, increased use of robotics and automation, and guidance improvements by directing customers to go online where they can, rather than rely on post and telephony services
• we delivered £38 million of efficiency savings in 2024 to 2025 by tackling compliance risks more effectively and supporting customers to get their tax affairs right at the outset
• we delivered £11 million in savings by reviewing our IT systems and licences, negotiating contracts to reduce costs

Tax revenues

Total tax revenues represent all money HMRC received (or was due to receive), less any money that we owed or repaid. They are driven by various factors, for example the overall level of activity in the economy and the rates of taxation, allowances and reliefs set by Parliament. Tax revenues are based on when a tax liability accrues. This is different to tax receipts, which are based on when a payment for a tax liability is received by HMRC. Figure 15 shows total tax revenues between 2020 to 2021 and 2024 to 2025.

Figure 15: Total tax revenues (note)

Note: Numbers may appear not to sum due to rounding.

During 2024 to 2025, we generated total revenues of £875.9 billion, £32.5 billion more than the previous financial year. Overall tax revenues have continued to increase, driven by economic factors such as growth in wages, profits and inflation as well as continued growth in the number of taxpayers within the tax system.

Income Tax revenues increased by £23.2 billion (8.1%) compared to 2023 to 2024, reflecting growing employment and average earnings growth. The Office for Budget Responsibility note that policy changes, including the decision to freeze some tax allowances and thresholds, boosted revenues.

National Insurance contributions decreased by £8.2 billion (4.6%) compared to 2023 to 2024 due to a reduction in some rates applicable to employees.

Corporation Tax revenues were unchanged compared to 2023 to 2024, and VAT revenues rose by £13.0 billion (7.9%) compared to 2023 to 2024.

Stamp tax revenues rose by £3.8 billion (25.3%). This rise reflects a recovery in the housing market, elevated revenues due to policy decisions at Autumn Budget 2024, as well as increased activity ahead of the decrease in nil-rate Stamp Duty Land Tax (SDLT) thresholds in April 2025.

[You can find more information on changes to tax revenues in the Trust Statement.]

Read more on tax receipts over time in our annual bulletin of HMRC tax receipts and National Insurance contributions on GOV.UK. Tax receipt data for 2024 to 2025 is provisional until Summer 2025. Receipts are on a cash basis and so represent when a payment for a tax liability is received by HMRC. This is different to tax revenues which are based on when the tax liability accrues.

Cost of collection

Table 4 shows that in 2024 to 2025, the cost of collection was 0.51 pence for every pound we generated in tax revenue, maintaining the amount it costs us at around half a penny for every £1 collected.

There are many factors that impact the cost of collection and the cost this year reflects an increase in expenditure which is offset by an increase in revenue. Our expenditure has increased due to investment to support the delivery of our priorities [and the factors that have impacted tax revenue are set out in the Tax revenues section above and the Trust Statement.]

Table 4: Cost of collection trends from 2020 to 2021 to 2024 to 2025 (note)

Year	Pence
2020-21	0.51
2021-22	0.50
2022-23	0.51
2023-24	0.51
2024-25	0.51

Note: A change to the methodology for the overall cost of collection has been made in 2021 to 2022 and the ratio is now shown net of Customs and International Trade.

Our spending compared to total tax revenue in 2024 to 2025

Figure 16 shows what it cost to run HMRC in 2024 to 2025. For our expenditure of £6,562 million, we generated £875.9 billion of revenue for the UK’s public services and provided £27,775 million in financial support for tax credits, Child Benefit and other reliefs.

Figure 16: Total expenditure relative to total revenue