Corporate report

HMRC's annual report and accounts 2025 to 2026: our accounts and annexes

Published 9 July 2026

Trust Statement

Statement of Revenue, Other Income and Expenditure

For the year ended 31 March	Note	2026 £bn	2025 (restated) £bn (note)
Taxes and duties
Income Tax	2.1	338.2	309.4
Value Added Tax	2.2	186.9	178.5
Corporation Tax	2.3	95.4	89.7
Capital Gains Tax	2.4	25.2	13.8
Hydrocarbon oils duties	2.5	24.9	24.7
Stamp taxes	2.6	19.7	18.8
Alcohol duties	2.7	12.4	12.8
Other taxes and duties	2.8	53.5	52.3
Total taxes and duties		756.2	700.0
Other revenue and income
National Insurance contributions	3.1	202.2	168.8
Student Loan recoveries	3.2	5.0	4.7
Fines and penalties	3.3	3.0	2.5
Total other revenue and income		210.2	176.0
Total revenue		966.4	876.0
Less expenditure
Impairment charges	5	(14.6)	(9.5)
Provisions in-year expenditure	7	(2.6)	(0.9)
Total expenditure		(17.2)	(10.4)
Less disbursements
National Insurance contributions paid and payable to the National Insurance Funds and National Health Services	3.1	(200.5)	(168.2)
Student Loan recoveries paid and payable to the Department for Education	3.2	(5.0)	(4.7)
Taxation paid to the Isle of Man	3.5	(0.4)	(0.3)
Total disbursements		(205.9)	(173.2)
Less appropriation of revenue to Resource Accounts
Accrued corporation tax reliefs expenditure	3.4	(10.8)	(10.1)
Accrued personal tax credits income/(expenditure)	3.4	0.1	(1.9)
Total appropriation of revenue to Resource Accounts		(10.7)	(12.0)
Total expenditure, disbursements, and appropriation of revenue		(233.8)	(195.6)
Net revenue for the Consolidated Fund		732.6	680.4

Note: Restated for a change in accounting policy for corporation tax reliefs. See note 1.2.

There were no recognised gains or losses accounted for outside the above Statement of Revenue, Other Income and Expenditure.

Statement of Financial Position 

As at	Note	31 March 2026 £bn	31 March 2025 (restated) £bn (note)	1 April 2024 (restated) £bn (note)
Non-current assets
Receivables falling due after one year	4	1.1	1.2	1.2
Current assets
Receivables	4	37.1	37.6	32.0
Accrued revenue receivable	4	160.9	145.0	142.8
Total current assets		198.0	182.6	174.8
Total assets		199.1	183.8	176.0
Current liabilities
Payables	6	(32.3)	(29.7)	(27.2)
Accrued revenue payable	6	(59.6)	(56.2)	(55.3)
Deferred revenue	6	(4.4)	(4.3)	(3.6)
Cash and cash equivalents	6	(1.3)	(1.3)	(1.1)
Total current liabilities		(97.6)	(91.5)	(87.2)
Assets less current liabilities		101.5	92.3	88.8
Non-current liabilities
Provision for liabilities	7	(9.9)	(8.2)	(8.3)
Total assets less total liabilities		91.6	84.1	80.5
Balance due to/(due from) Consolidated Fund account	8	91.6	84.1	80.5

Note: Restated for a change in accounting policy for corporation tax reliefs. See note 1.2.

John-Paul Marks
Accounting Officer
1 July 2026

Statement of Cash Flows

For the year ended 31 March	2026 £bn	2025 (restated) £bn (note)
Net revenue for the Consolidated Fund	732.6	680.4
(Increase) / decrease in non-cash assets	(15.3)	(7.8)
Increase / (decrease) in non-cash current liabilities	6.1	4.1
Increase / (decrease) in provision for liabilities	1.7	(0.1)
Net cash flow from operating activities	725.1	676.6
Less: Cash paid to the Consolidated Fund	(725.1)	(676.8)
Increase/(decrease) in cash and cash equivalents in this period	-	(0.2)
Net funds as at 1 April (opening cash and cash equivalents balance)	(1.3)	(1.1)
Net funds as at 31 March (closing cash and cash equivalents balance)	(1.3)	(1.3)

Note: Restated for a change in accounting policy for corporation tax reliefs. See note 1.2.

Notes to the Trust Statement

Notes to the financial statements provide additional information required by statute and accounting standards to explain a particular feature of the financial statements. The notes also provide explanations and additional disclosure to assist readers’ understanding and interpretation of the financial statements.

1. Statement of accounting policies

1.1. Basis of preparation

The Trust Statement is prepared in accordance with:

• the accounts direction issued by HM Treasury under Section 2 of the Exchequer and Audit Departments Act 1921
• the 2025 to 2026 FReM issued by HM Treasury 
• International Financial Reporting Standards (IFRS) adapted or interpreted for the public sector context
• historical cost convention in accordance with the FReM, where assets are recorded at their original value
• accounting policies detailed in subsequent notes

The accounting policies have been developed by HMRC and have been reviewed during 2025 to 2026, with some changes in policy detailed below. These policies, as amended, have been applied consistently in dealing with items considered material in relation to the accounts.

HMRC is the UK’s tax authority, its core purpose being to collect the money that pays for the UK’s public services and provide people with financial support. This is enshrined in legislation (Section 5 of the Commissioners for Revenue and Customs Act 2005 states that the commissioners are responsible for the collection and management of revenue) and is expected to continue indefinitely, with HMRC’s existence being fundamental to the financing of UK infrastructure and government operations. The Trust Statement is therefore prepared on a going concern basis.

The financial information presented is rounded to the nearest £0.1 billion, except for taxation due to the Isle of Man (note 3.5) and revenue losses (note 5.1), which are rounded to the nearest £1 million, due to the much smaller amounts disclosed in these notes.

Basis of accounting

The majority of taxes and duties are accounted for on an accruals basis.

As agreed with HM Treasury the following elements are accounted for on a partial accrual basis as not enough information is known to reliably accrue for the revenue, hence there is no accrued revenue receivable estimate in the Statement of Financial Position:

• Corporation Tax for smaller companies that do not pay by instalments — note 2.3
• Inheritance Tax — note 2.8
• Capital Gains Tax reported via Self Assessment — note 2.4

As agreed with HM Treasury the following elements and some repayments are accounted for on a cash basis:

• Stamp Duty — note 2.6
• National Insurance classes 1A and 1B expenses and benefits — note 3.1

Accounting for these elements on a cash basis does not have a material impact on revenue.

Significant accounting estimates with estimation uncertainty

The preparation of the financial statements includes the use of estimates and assumptions. Although the estimates have been prepared using the best information available at the time of production, actual results may differ from those estimates. The significant accounting estimates with a risk of a material change to the carrying value within the next year in terms of IAS 1, ‘Presentation of Financial Statements’, are:

• Income Tax self assessment accrued revenue receivable — note 4.2.2
• Corporation Tax (Quarterly Instalment Payments) accrued revenue receivable net of corporation tax reliefs — note 4.2.3
• Tax receivable and accrued revenue receivable impairment — note

1.2. Changes in accounting policies

Corporation tax reliefs

Following HM Treasury’s Clear Line of Sight reforms implemented in 2011 to 2012, corporation tax reliefs (CTRs), comprising negative revenues and payable credits covering both Quarterly Instalment Payers and non-Quarterly Instalment Payers, have been accounted for in the Resource Accounts.

During HMRC’s annual review of accounting policies, HMRC management identified an immaterial amount (£2.8 billion opening balance) of Corporation Tax Relief (CTR) that had been double counted across the Trust Statement and Resource Accounts since the implementation of the HM Treasury’s Clear Line of Sight reform.

This led to a further review to simplify the way HMRC accounts for CTR across the Trust Statement and Resource Accounts to better reflect the substance of CTRs, which is an integral part of Corporation Tax rather than a separate relief and credit scheme.

Corporation Tax liabilities, reliefs, offsets and repayments are managed and maintained together as an account balance. All are accounted for in the Trust Statement except for CTRs, which are settled via the Trust Statement but since 2011 to 2012 have been recognised in the Resource Accounts Statement of Financial Position (SoFP). With HM Treasury agreement, HMRC has changed its accounting policy for CTRs to move the CTR accrued liabilities from the Resource Accounts SoFP to the Trust Statement SoFP to better reflect the substance of how CTRs are settled.

The Resource Accounts will continue to recognise accrued CTR expenditure, complying with Consolidated Budgeting Guidance. As per the FReM, accrued CTR expenditure will continue to be de-recognised from Trust Statement revenues where it initially arises and appropriated to the Resource Accounts’ Statement of Comprehensive Net Expenditure.

In accordance with IAS 8, a voluntary change in accounting policy is required to be applied retrospectively. As a result, prior periods for 2024 and 2025 have been restated — see table below for a summary of the changes:

Statement of Revenue, Other Income and Expenditure	2024-25 restated £bn	2024-25 published £bn	Change £bn	Note reference
Taxes and duties
Corporation Tax revenue	89.7	89.6	0.1	2.3
Total Revenue	876.0	875.9	0.1
Less Accrued CTR expenditure	(10.1)	(9.5)	(0.6)	3.4
Net revenue for the consolidated fund	680.4	680.9	(0.5)
Statement of Cash Flows
Net revenue for the Consolidated Fund	680.4	680.9	(0.5)
(Increase)/decrease in non-cash assets	(7.8)	(7.5)	(0.3)
Increase/(decrease) in non-cash liabilities	4.1	3.3	0.8

Statement of Financial Position	31 March 2025 restated £bn	31 March 2025 published £bn	Change £bn	1 April 2024 restated £bn	1 April 2024 published £bn	Change £bn	Note
Current assets (non-cash)
Accrued revenue receivables
Corporation Tax	12.9	14.1	(1.2)	12.6	14.1	(1.5)	4.2.3
Current liabilities (non-cash)
Accrued revenue payables
Corporation Tax	14.1	6.4	(7.7)	11.6	4.7	(6.9)	6.2.1
Total assets less total liabilities	84.1	93.0	(8.9)	80.5	88.9	(8.4)
Balance on the Consolidated Fund	84.1	93.0	(8.9)	80.5	88.9	(8.4)	8

Accrued interest

HMRC charges late payment interest to encourage prompt payments and pays out repayment interest to compensate taxpayers when they overpay or pay ahead of schedule.

In prior years, HM Treasury provided HMRC with dispensation to account for interest on a cash basis. In 2025 to 2026, HMRC has included an estimate for accrued interest and no longer recognises it on a cash basis. The impact on net revenue in 2025-2026 after impairment as per note 5.2 was an increase of £0.3 billion.

In accordance with IAS 8, application of a new accounting policy that is immaterial does not require to be applied retrospectively. Therefore, this accounting policy change has been applied prospectively in 2025 to 2026.

VAT Import One Stop Shop

The VAT Import One Stop Shop (IOSS) scheme allows businesses to simplify VAT reporting and payment for low value goods imported from outside the EU and Northern Ireland to consumers in the EU or Northern Ireland.

In prior years, HM Treasury provided HMRC with dispensation to account for IOSS on a cash basis. In 2025 to 2026, HMRC Transformation implemented a change whereby IOSS is now accounted for on an accrued basis. The impact on revenue was less than £0.1 billion. IOSS is included within VAT throughout the Trust Statement.

In accordance with IAS 8, application of a new accounting policy that is immaterial does not require to be applied retrospectively. Therefore, this accounting policy change has been applied prospectively in 2025 to 2026.

1.3. Revenue recognition

Taxes and duties are measured at the fair value of the consideration received or receivable net of repayments. Revenue is recognised as per the FReM, which is in accordance with International Financial Reporting Standard 15 with adaptations applied, as taxes and duties arise from statute and not a contract. Revenue is recognised when all the elements below are satisfied:

• a taxable event has occurred (these are described in note 2 for material taxes and duties)
• the revenue can be measured reliably
• it is probable that the economic benefits from the taxable event will flow to HMRC, where the term ‘probable’ means that the flow of revenue should be more likely than not to occur

Revenues are deemed to accrue evenly over the period for which they are due.

HMRC undertakes compliance work to collect or protect revenue as part of its strategic objective to close the tax gap. This includes work in tackling avoidance, evasion and criminal attack. Given the uncertainty of both the probability of economic flow and reliability of estimated figures, future revenue flows in relation to this activity are not recognised until such time as a liability is assessed and established.

1.4. The tax gap

The tax gap is not required to be recognised or measured in the Trust Statement. The tax gap is the difference between the amount of tax that should, in theory, be paid to HMRC and what is actually collected.

Further information on the tax gap can be found in the section ‘Closing the tax gap’.

1.5. Impending application of newly issued accounting standards not yet effective

New and revised standards and interpretations have been issued but are not yet effective and have not therefore been adopted in this account.

IFRS 18 — Presentation and Disclosure of Financial Statements

IFRS 18 will replace IAS 1 Presentation of Financial Statements and is effective for annual reporting periods beginning on or after 1 January 2027 in the private sector. The standard has now been endorsed by the UK Endorsement Board (UKEB) but has not yet been considered by the Financial Reporting Advisory Board (FRAB).

IFRS 19 — Subsidiaries without Public Accountability: Disclosures

The objective of IFRS 19 is to specify the disclosure requirements an entity may apply instead of those in other IFRS Accounting Standards. The standard is also effective from 1 January 2027 in the private sector. IFRS 19 has not yet been endorsed by the UK Endorsement Board (UKEB) and has not yet been considered by the Financial Reporting Board (FRAB). The impact of these standards on the public sector is still being assessed, and a decision has not yet been taken on an implementation date. HMRC will assess the implications of adopting these standards once endorsement has been completed.

2. Accounting policies and analysis

2.1. Income Tax

For the year ended 31 March	2026 £bn	2025 £bn
Pay As You Earn and other Income Tax	274.9	261.8
Self Assessment	61.5	46.4
Simple Assessment	1.8	1.2
Total	338.2	309.4

The taxable event for Income Tax (IT) is the earning of assessable income during the taxation period by the taxpayer. Accrued revenue for Self Assessment is required to be estimated, as tax returns reporting taxpayer liabilities are not filed until after the Trust Statement has been published. See note 4.2.2 for further information.

IT includes amounts collected on behalf of the Scottish and Welsh devolved administrations, further details of which are set out in note 12.

2.2. Value Added Tax

For the year ended 31 March	2026 £bn	2025 £bn
Gross revenue	302.6	287.4
Less: revenue repayable	(115.7)	(108.9)
Net revenue	186.9	178.5

The taxable event for Value Added Tax (VAT) is the supply of goods and services that attract VAT during the taxation period by the taxpayer. VAT is structured in such a manner that taxpayers are also entitled to claim repayments; hence a breakdown of gross revenue and repayments is disclosed. A small proportion of accrued revenue for VAT is required to be estimated, see note 4.2.4 for further information.

2.3. Corporation Tax

For the year ended 31 March	2026 £bn	2025 (restated) £bn  (note)
Current year revenue	96.3	90.0
5-year corporation tax reliefs stability adjustment	(0.9)	(0.3)
Total	95.4	89.7 (note)

Note: Restated for a change in accounting policy for corporation tax reliefs. See note 1.2.

The taxable event for Corporation Tax is the earning of assessable profit during the taxation period by the taxpayer. The nature of Corporation Tax legislation and our associated systems mean that accrued revenue is required to be estimated, as tax returns reporting taxpayer liabilities, reliefs or associated tax payments related to the taxation period are not filed until after the Trust Statement has been published. See note 4.2.3 for further information.

Corporation Tax is accounted for on a partial accrual basis, as agreed with HM Treasury (see note 1.1), because not enough information is known to reliably accrue for the revenue for smaller companies that do not pay by instalments. There is no accrued revenue receivable estimate in the Statement of Financial Position for these smaller companies, except for corporation tax reliefs (CTR).

As per the FReM, £10.8 billion (£10.1 billion restated in 2024 to 2025 — see note 1.2) was recorded in the Trust Statement as appropriation of revenue received to fund the CTR expenditure reported in the Resource Accounts (see note 3.4). Of the £10.8 billion expenditure, a £0.9 billion stability reduction (£0.3 billion reduction in 2024 to 2025) represents the extent to which the final estimate differs from the initial estimate recorded 5 years previous.

For further information on the breakdown of CTR expenditure see note 3.1.3 in the Resource Accounts.

2024 to 2025 restated revenue for the change in accounting policy

As described in note 1.2, HMRC has restated the 2024 to 2025 Corporation Tax revenue, reflecting the change to accounting policy. Below provides a breakdown of the restated Corporation Tax revenue position:

For the year ended 31 March	2025 £bn
Current year revenue	89.9
5-year corporation tax reliefs stability adjustment	(0.3)
Originally published Corporation Tax revenue	89.6
Change in accounting policy — recognising CTR movement	(0.5)
Appropriation of revenue to the Resource Accounts	0.6
Restated Corporation Tax Revenue	89.7

2.4. Capital Gains Tax

For the year ended 31 March	2026 £bn	2025  £bn
Total	25.2	13.8

The taxable event for Capital Gains Tax (CGT) is the disposal of a chargeable asset leading to a taxable gain.

The rise in CGT is mainly due to policy changes. The higher CGT rates from the Autumn Budget 2024 now apply for a full year, and reforms to the non-domiciled tax regime since April 2025 have expanded the scope of taxable gains. The Temporary Repatriation Facility has also accelerated recognition of foreign gains at reduced rates.

CGT receipts for UK residents are reported in the Trust Statement on a partial accrual basis and repayments are reported on a cash basis in the period the repayment is made (see note 1.1).

2.5. Hydrocarbon oils duties

For the year ended 31 March	2026 £bn	2025 £bn
Total	24.9	24.7

The taxable event for hydrocarbon oils duties is the date of production, date of import or date of movement of relevant goods out of a duty suspended regime (a regime where, under UK legislation, certain goods benefit from a temporary suspension or reduction of import duties).

2.6. Stamp taxes

For the year ended 31 March	2026 £bn	2025 £bn
Stamp Duty Land Tax	14.8	14.3
Stamp Duty Reserve Tax	3.4	3.1
Stamp Duty	1.3	1.3
Annual Tax on Enveloped Dwellings	0.2	0.1
Total	19.7	18.8

The taxable event for:

• Stamp Duty Land Tax (SDLT) is the purchase of property
• Stamp Duty Reserve Tax and Stamp Duty is the purchase of shares — HMRC can only record Stamp Duty when a stamp is presented to HMRC and hence the duty is recognised on a cash basis (see note 1.1)
• Annual Tax on Enveloped Dwellings (ATED) is a company owning or part-owning a UK residential property valued at £500,000 or more during a chargeable period — ATED applies to a property that is a dwelling, if all or part of it is used, or could be used, as a residence

2.7. Alcohol duties

For the year ended 31 March	2026 £bn	2025 £bn
Wine, cider and perry	4.8	4.9
Spirits	4.1	4.2
Beer	3.5	3.7
Total	12.4	12.8

The taxable event for alcohol duties is the date of production, date of import or date of movement of relevant goods out of a duty suspended regime (a regime where, under UK legislation, certain goods benefit from a temporary suspension or reduction of import duties).

2.8. Other taxes and duties

For the year ended 31 March	Note	2026 £bn	2025 £bn
Insurance Premium Tax		9.1	9.3
Inheritance Tax		8.3	8.2
Tobacco duties		7.4	7.9
Customs duties		5.0	4.9
Air Passenger Duty		4.5	4.2
Apprenticeship Levy		4.4	4.1
Betting and Gaming duties		3.9	3.7
Energy Profits Levy		2.6	3.3
Climate Change Levy		1.8	1.8
Bank Levy		1.7	1.1
Bank Surcharge		1.2	0.7
Digital Services Tax		1.1	0.9
Diverted Profits Tax		0.6	0.1
Landfill Tax		0.5	0.7
Aggregates Levy		0.4	0.4
Soft Drinks Industry Levy		0.4	0.3
Plastic Packaging Tax		0.3	0.2
Electricity Generator Levy		0.1	0.5
Residential Property Developer Tax		0.1	0.1
Petroleum Revenue Tax	2.8.1	0.1	(0.1)
Total		53.5	52.3

Details of taxes and duties are shown below where:

• taxes are reported in the Trust Statement for the first time
• accounting adjustments have materially impacted net revenue
• negative net revenue is reported

2.8.1. Petroleum Revenue Tax

Petroleum Revenue Tax (PRT) is a ‘field-based’ tax charged on the profits arising from individual oil and gas fields that were approved for development before 16 March 1993. The rate of PRT was permanently set at 0% effective from 1 January 2016 but it has not been abolished so that losses (such as losses arising from decommissioning fields liable to PRT) can be carried back against past PRT payments, with HMRC making a provision for this. PRT revenue reflects an accounting adjustment due to a reduction of PRT accrued revenue payables. For further information on oil and gas field decommissioning costs, see note 7.2.

3. Other revenue, income and disbursements 

3.1. National Insurance contributions

For the year ended 31 March	2026 £bn	2025 £bn
National Insurance contributions
Class 1	199.6	165.2
Class 2	0.3	0.3
Class 4	2.3	3.3
Total National Insurance contributions (NICs)	202.2	168.8
NIC expenditure	(1.7)	(0.6)
NICs due to NIF and NHS	200.5	168.2
Disbursements
National Insurance Fund Great Britain (NIF GB)	(160.1)	(129.9)
+	(3.4)	(2.7)
National Health Services (NHS)	(37.0)	(35.6)
Total disbursements	(200.5)	(168.2)

National Insurance contributions (NICs) are collected by HMRC on behalf of the National Insurance Funds (NIF) of Great Britain and Northern Ireland and the National Health Services (NHS) for England, Wales, Scotland and Northern Ireland. They are payable to the NIF and the NHS when received and not when accrued.

NICs class 1 revenue has increased compared to the same period last year due to changes in NICs rates and allowances announced at Autumn Budget 2024.

NICs 1A and 1B expenses and benefits information reported via P11D and P11D(b) forms is not available at the time of producing the Trust Statement so these are recognised on a cash basis (see note 1.1).

From April 2024, Class 2 National Insurance contributions ceased to be payable on a compulsory basis as part of wider reforms to simplify the National Insurance system for the self employed and reduce administrative burdens. Self employed individuals with profits below the Small Profits Threshold (SPT) may still choose to pay Class 2 contributions on a voluntary basis in order to maintain entitlement to contributory benefits, including the State Pension.

NICs class 3 voluntary contributions are accounted for in the National Insurance Fund Accounts.

3.2. Student Loan recoveries

For the year ended 31 March	2026 £bn	2025 £bn
Student Loan recoveries	5.0	4.7
Student Loan recoveries paid and payable to the Department for Education	(5.0)	(4.7)
Net revenue	-	-

Student Loan recoveries are collected on behalf of and paid to the Department for Education (DfE), who administer Student Loans. The majority are collected through PAYE with an element collected through Self Assessment. Any difference between the amount of Student Loan recoveries received and the cash paid to the DfE would be shown as a payable (see note 6 — other taxes and duties).

3.3. Fines and penalties

For the year ended 31 March	2026 £bn	2025 £bn
Fines and penalties	3.0	2.5

This consists of income arising from the levying of tax fines and penalties. Penalties relating to NICs (£43 million) are accounted for as NIC income and paid over to the National Insurance Fund.

3.4. Appropriation of revenue to the Resource Accounts

For the year ended 31 March	2026 £bn	2025 (restated) £bn (note)
Current year corporation tax reliefs expenditure	(11.7)	(10.4)
5-year corporation tax reliefs stability adjustment	0.9	0.3
Total accrued corporation tax reliefs expenditure	(10.8)	(10.1) (note)
Accrued personal tax credits income/(expenditure)	0.1	(1.9)
Net revenue	(10.7)	(12.0)

Note: Restated for a change in accounting policy for corporation tax reliefs. See note 1.2.

Corporation tax reliefs

Expenditure relating to Corporation Tax Reliefs (CTR) is recognised in the Resource Accounts on an accrued basis. The Trust Statement is responsible for the payment of CTR through the tax collection and repayment process.

As per the FReM, these amounts are recorded in the Trust Statement as revenue received and as appropriation of revenue to the Resource Accounts to fund the expenditure.

Due to the delay between Corporation Tax returns and relief claims being filed and the complexity with which CTR deductions, offsets and credits can be settled, total accrued CTR expenditure for the reporting period must be estimated. The final estimate; a reasonable proxy for final outturn; is produced 5 years after the initial estimate and the variance is reported in the year the estimate is finalised. For 2025 to 2026, a £0.9 billion reduction has been reported relating to 2020 to 2021 (£0.3 billion reduction relating to 2019 to 2020 in 2024 to 2025).

Personal Tax Credits

Expenditure relating to Personal Tax Credits (PTC) is recognised in the Resource Accounts. The Trust Statement is responsible for the payment of PTC through the tax repayment process.

As per the FReM, these amounts are recorded in the Trust Statement as appropriation of revenue to the Resource Accounts to fund the expenditure.

The reduction in PTC reflects the migration of claimants to Universal Credit, which is accounted for in the Department for Work & Pensions’ accounts. PTC ended on 5 April 2025. HMRC remains legally obliged to pay any outstanding valid entitlements and any individuals who have previously been overpaid PTC and no longer claim Universal Credits are able to repay HMRC directly.

For further information on CTR and PTC, see note 3.1.3 and 3.1.1 respectively in the Resource Accounts.

For further reference to the appropriation of revenue to the Resource Accounts, see the Consolidated Statement of Changes in Taxpayers’ Equity in the Resource Accounts.

3.5. Taxation due to the Isle of Man

Under the Isle of Man Act 1979, the UK and the Isle of Man (IoM) share certain tax revenues. A new agreement signed on 11 April 2025 replaces all previous arrangements. Some taxes, called ‘common duties’, are pooled and then split between the UK and the IoM. The IoM’s share is based on goods and services used on the island.

If the IoM’s share is higher than what it collects itself, the UK pays the difference (shown as a disbursement). If the IoM collects more than its agreed share, it pays the UK (shown as other revenue and income).

For the year ended 31 March 2026, net payments to the IoM were £401 million (£333 million in 2024 to 2025).

4. Receivables and accrued revenue receivable

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.

	Receivables As at 31 March 2026 £bn	Accrued revenue  receivable As at 31 March 2026 £bn	Total As at 31 March 2026 £bn	Receivables As at 31 March 2025 £bn	Accrued revenue receivable (restated) As at 31 March 2025 £bn (note 1)	Total As at 31 March 2025 £bn
Non-current assets
Receivables due after one year:
Inheritance Tax	2.0	-	2.0	2.2	-	2.2
Non-current assets before impairment	2.0	-	2.0	2.2	-	2.2
Less impairment (note 5.2)	(0.9)	-	(0.9)	(1.0)	-	(1.0)
Total non-current assets after impairment	1.1	-	1.1	1.2	-	1.2
Current assets
Receivables and ARR due within one year:
Income Tax	19.0	66.6	85.6	18.3	58.3	76.6
Value Added Tax	18.9	51.0	69.9	18.5	47.3	65.8
Corporation Tax	7.3	12.6	19.9	7.0	12.9 (note 1)	19.9 (note 1)
National Insurance Contributions	7.2	22.2	29.4	7.3	18.4	25.7
Other taxes and duties	15.7	10.5	26.2	15.7	10.0	25.7
Current assets before impairment	68.1	162.9	231.0	66.8	146.9	213.7
Less impairment (note 5.2)	(31.0)	(2.0)	(33.0)	(29.2)	(1.9)	(31.1)
Total current assets after impairment	37.1	160.9	198.0	37.6	145.0	182.6
Total assets before impairment	70.1	162.9	233.0	69.0	146.9	215.9
Less impairment (note 5.2) (note 2)	(31.9)	(2.0)	(33.9)	(30.2)	(1.9)	(32.1)
Total assets after impairment	38.2	160.9	199.1	38.8	145.0	183.8

Notes:

1. Restated for a change in accounting policy for corporation tax reliefs. See note 1.2 and 4.2.3 for further details.
2. Total impairment of £33.9 billion is shown between non-current and current assets in the table above. In note 5.2 this total is shown by receivables and accrued revenue receivable, and by age of debt, in the respective tables.

4.1. Receivables

Receivables represent all taxpayer liabilities that have been established, due or overdue, for which payments have not been received at the Statement of Financial Position date. Established taxpayer liabilities that are postponed subject to ongoing appeals are excluded from receivables unless likelihood of receipt is probable (see note 1.3).

Further information on receivables can be found in the section ‘Chief Executive’s Performance Report, Collecting debt’.

4.2. Accrued revenue receivable

Accrued revenue receivable (ARR) represents amounts of taxes and duties where the taxable event has occurred but the tax return has not been received from the taxpayer by the end of the reporting period. For taxes where HMRC has received returns since the end of the reporting period, the department used this information to support its valuation of ARR. For those taxes where HMRC is yet to receive taxpayer returns, principally Income Tax self assessment (ITSA) and Corporation Tax, HMRC has estimated ARR. Due to the nature of tax legislation, ITSA and Corporation Tax are the most difficult taxes to estimate.

Tax forecasting models are used to produce the ITSA and Corporation Tax ARR estimates and take into consideration the economic assumptions prepared for the March 2026 Spring statement and the Economic and Fiscal Outlook published by the Office for Budget Responsibility (OBR) in March 2026.

These estimates have been prepared using the judgement of professional departmental economists and statisticians.

4.2.1. Uncertainty around the ARR estimates

Conclusions around estimation uncertainty are based on evidence from the performance of our estimation models over previous years, changes to reflect the March 2026 Spring statement and changes to reflect the Economic and Fiscal Outlook published by the OBR in March 2026.

Actual outcomes could differ from the estimates used, due to the areas of uncertainty involved.

Each year HMRC reviews the performance of its estimation models. Last year, the ARR underestimation was £3.3 billion, 0.4% of 2024 to 2025 total revenue (ARR overestimation of £5.5 billion in 2023 to 2024, 0.7% of 2023 to 2024 total revenue).

The process for each significant estimate is described in more detail below.

4.2.2. Income Tax self assessment

Income Tax self assessment (ITSA) ARR is estimated to be £35.4 billion this year (£28.9 billion in 2024 to 2025), which is included in the total Income Tax ARR of £66.6 billion (£58.3 billion in 2024 to 2025) in note 4.

The SA regime involves long filing and payment lags, so the ARR estimate is based on forecast liabilities as the corresponding SA returns for 2025 to 2026 are not due until 31 January 2027.

The SA ARR estimate is the total of the forecast liabilities for 2025 to 2026 less:

• any payments already received by 31 March 2026
• unpaid Payment on Account 1 liabilities relating to 2025 to 2026

The estimate is driven by March 2026 Spring statement forecast and the OBR central economic forecast. This generates key assumptions within SA ARR including self-employed income growth, dividend income growth and Average Effective Tax Rates (AETRs). AETRs show the average amount of tax people pay on different types of income, and they help explain how the overall forecast might change if people end up paying slightly more or less tax than expected.

Sensitivity analysis has been produced to demonstrate the impact of changes to key assumptions used in the current estimate, and the results of those considered high-risk are shown in the table below.

Based on historic data, likely changes in key income assumptions are not expected to exceed the percentages within the table below.

Impact on ITSA ARR of varying key economic factors

Key assumption (percentage point change)	Increase £bn	Decrease £bn
Average Effective Tax Rates (+/- 0.3–3% points) (note)	2.4	(2.4)
Dividend income growth (+/-11% points)	1.9	(1.9)
Self-employed income growth (+/-6% points)	1.7	(1.7)

Note: Different AETRs have been grouped and fall within the range above.

4.2.3. Corporation Tax

Corporation Tax ARR is £12.6 billion (£12.9 billion restated in 2024 to 2025) which includes an estimated amount of £7.2 billion (£7.5 billion in 2024 to 2025).

As with SA, the filing of Corporation Tax returns and related payments are subject to a considerable lag and relate to the accounting periods of taxpayers rather than the current taxation period. Since there is less outturn data available, the ARR estimate is subject to uncertainty.

The key drivers of the ARR estimate are outturn Corporation Tax receipts and returns received to date, which are net of corporation tax reliefs, and a series of assumptions. The assumptions used are needed to estimate the total amount of accrued tax liabilities arising from profits generated in the taxation period and from Corporation Tax returns that relate to 2025 to 2026 but are not available at the point of estimation.

Separate ARR estimates have been calculated for onshore and North Sea oil and gas (offshore) companies because of differences in how these companies operate and, in particular, the number of instalments paid. Further detail can be found below.

Onshore companies

Corporation Tax for large and very large onshore companies is paid in 4 Quarterly Instalment Payments (QIPs). Corporation Tax ARR has been estimated where between one and four QIPs have been received using a model that forecasts companies’ Corporation Tax liabilities based on the number and value of QIPs received by a given date.

The key assumptions used in this modelling are the proportion of Corporation Tax that is paid late and/or overpaid and the proportion of Corporation Tax liabilities paid in each quarterly instalment. These assumptions are informed by looking at historic trends in outturn data. CT is assumed to accrue evenly throughout the companies’ accounting periods.

For accounting periods where no QIPs have been received, ARR has been estimated using OBR’s March 2026 Corporation Tax forecast.

As agreed with HM Treasury, Corporation Tax for smaller companies that do not pay by instalment are accounted for on a partial accrual basis, as a reliable ARR estimate for these companies cannot be formed, with the exception of corporation tax reliefs for smaller companies, which is accounted for on an accrued basis. An estimate of £1.2 billion is included within Corporation Tax ARR.

North Sea oil and gas companies

North Sea companies pay their Corporation Tax liabilities in Three Instalment Payments (TIPs). A similar methodology to that of onshore companies is used for calculating the estimate.

However, most TIPs relating to liabilities from 1 January to 31 March are not due in sufficient time to be included in the TIPs estimation model and these amounts are therefore estimated.

This year’s estimate is based on energy price assumptions consistent with those used in the Oil and Gas Provision, resulting in an increase in the ARR estimate for North Sea companies due to the expected growth in liabilities.

Impact on CT ARR of varying key economic factors  

Sensitivity analysis has been produced to demonstrate the impact of changes to key assumptions used in the current estimate and the results are shown in the table below.

Based on recent historic data, changes in key assumptions are likely to fall within the ranges in the table below:

Key assumption (percentage point change)	Increase £bn	Decrease £bn
Corporation Tax liability growth (+/-10% points)	0.4	(0.4)
Late payments (+/-1% point)	0.1	(0.1)
Overpayments (+/-1% point)	(0.2)	0.2
Proportion of companies’ Corporation Tax liabilities paid with in-year QIPs (+/-2% point)	(0.6)	0.9

Change in accounting policy — Corporation Tax reliefs

As described in note 1.2, HMRC has restated the 2024 to 2025 Corporation Tax ARR balance, reflecting the change to accounting policy to the Balance on Consolidated Fund — see note 8. Below provides a breakdown of the restated Corporation Tax ARR position:

As at 31 March	2025 £bn
Corporation Tax accrued revenue receivable balance as at 1 April 2024	14.1
Opening balance correction for the change in accounting policy – accrued CTR negative tax	(1.5)
Restated Corporation Tax accrued revenue receivable balance as at 1 April 2024	12.6
2024-25 accrued CTR negative tax movement — change in accounting policy	0.3
Restated Corporation Tax ARR balance as at 31 March 2025	12.9

4.2.4. Value Added Tax

Value Added Tax (VAT) ARR is £51 billion (£47.3 billion in 2024 to 2025) which includes an estimated amount of £6.6 billion (£5.6 billion in 2024 to 2025). A large amount of the VAT ARR is based on actual return data and is not therefore subject to significant estimation uncertainty. Returns submitted in June and July relating to the current reporting period are not available at the time of producing the ARR so an estimate is produced by calculating the value of these returns in the prior year and adjusting by the year-on-year revenue growth rate.

Impact on VAT ARR of varying key economic factors

Key assumption (percentage point change)	Increase £bn	Decrease £bn
ARR estimate as proportion of total VAT gross revenue (+/- 0.5% points)	1.5	(1.5)

5. Impairment charges

Impairment charges are made up of revenue losses and the movement in the impairment of receivables and ARR.

For the year ended 31 March	2026 £bn	2025 £bn
Revenue losses	12.8	7.2
Increase in impairment of receivables and ARR	1.8	2.3
Total impairment charges	14.6	9.5

5.1. Revenue Losses

For the year ended 31 March	2026  Remissions £m	2026  Write-offs  £m	2026 Total £m	2025 Remissions £m	2025 Write-offs £m	2025 Total £m
Income Tax	585	2,194	2,779	215	1,137	1,352
Value Added Tax	1,091	3,393	4,484	146	2,774	2,920
Corporation Tax	471	1,082	1,553	21	499	520
National Insurance Contributions	243	1,468	1,711	60	728	788
Fines and penalties	587	958	1,545	659	666	1,325
Other remissions and write-offs	120	587	707	109	216	325
Total revenue losses	3,097	9,682	12,779	1,210	6,020	7,230

Revenue losses are made up of remissions and write-offs:

• remissions are debts HMRC has decided not to pursue on the grounds of value for money — this is where further recovery action would not be cost effective because the customer has no ability to pay, holds no realisable assets, or where the costs of enforcement would be disproportionate to the amount likely to be recovered
• write-offs are debts that are considered to be irrecoverable because, for example, the entity no longer exists

The vast majority of revenue losses are driven by individual and business insolvencies. On 31 March 2026, HMRC had £3.7 billion of debt that may go into formal insolvency. Once in formal insolvency, on average the dividend payment HMRC eventually receives is 5 pence in the pound. In 2025 to 2026 we have received £293 million in such dividend payments (£233 million in 2024 to 2025).

The increase in revenue losses reflects the continued unwinding of formal insolvency delays, caused by pandemic-related court restrictions imposed throughout 2020 and 2021, together with the effects of government support measures available at that time.

For certain taxes, only a partial split between remissions and write-offs is known. Where information is unavailable, the percentage split of the known element is applied to the remainder to calculate a total estimated remission and write-off split.

Taxpayers can satisfy their inheritance tax with certain categories of property rather than cash. HM Treasury set an annual offer limit of £40 million for the amount of tax that can be satisfied by acceptance in lieu. This is treated as a tax loss and is included in other remissions and write-offs, as no revenue will flow to the consolidated fund. For 2025 to 2026, tax satisfied by acceptance in lieu was £23 million.  

Fines and penalties losses relating to National Insurance contributions (NICs) are accounted for as NICs revenue losses.

Further information on losses can be found in the section ‘Chief Executive’s Performance Report, Collecting debt’.

Large Revenue Losses

For the year ended 31 March 2026, there were 65 large cases totalling £2.4 billion (45 cases totalling £1.9 billion in 2024 to 2025). Details are shown below: 

• there were 53 write-offs relating to insolvency, one for a missing trader write-off and 8 remissions totalling £2 billion (39 write-offs and 3 remissions totalling £1.1 billion in 2024 to 2025)
• there were 3 bulk remissions totalling £347 million (3 bulk remissions totalling £839 million in 2024 to 2025). Details are shown below:
  • Self Assessment (SA) penalties of £284 million (£231 million in 2024 to 2025), where customers were no longer liable for SA, or no longer self-employed and had ceased to trade
  • SA debts of £40 million (£558 million in 2024 to 2025), where customers were no longer self-employed and who had ceased to trade in the tax year 2020 to 2021 or earlier — HMRC decided not to pursue on the grounds of value for money for both SA bulk remissions
  • annual IHT Assets in Lieu of £23 million (£50 million in 2024 to 2025), treated as a tax loss as explained above

5.2. Impairment of receivables and accrued revenue receivable

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.

	Impairment of receivables As at 31 March 2026 £bn	Impairment of accrued revenue receivable As at 31 March 2026 £bn	Total As at 31 March 2026 £bn	Impairment of receivables As at 31 March 2025 £bn	Impairment of accrued revenue receivable As at 31 March 2025 £bn	Total As at 31 March 2025 £bn
Balance as at 1 April	30.2	1.9	32.1	27.6	2.2	29.8
Impairment in-year expenditure	1.7	0.1	1.8	2.6	(0.3)	2.3
Balance as at 31 March	31.9	2.0	33.9	30.2	1.9	32.1

Receivables and accrued revenue receivable (ARR) in the Statement of Financial Position are reported after impairment to reflect an amount that is likely to be collected. This amount is estimated based on HMRC’s analysis of existing receivables, debt and ARR collection rates.

The FReM does not require HMRC to determine impairments in accordance with IFRS 9, as the standard relates to financial instruments, and taxes and duties arise from statute and not a contract. However, impairments have been measured applying the simplified expected credit loss (ECL) model set out in IFRS 9.

The ECL model estimates the future recoverability of receivables and ARR based on their age and current debt clearance rates, accepting that the non-payment risk associated with tax debt increases with age.

HMRC has reviewed a number of scenarios and determined that using current period debt clearance rates are reasonable in estimating future recoveries.

The table below provides an age breakdown of the current scenario:

Age	Gross balance £bn As at 31 March 2026	Impairment rate % As at 31 March 2026	Impairment £bn As at 31 March 2026	Impairment £bn As at 31 March 2025
Not impaired (note 1)	1.0	0.0	-	-
Accrued revenue receivable	162.9	1.2	2.0	1.9
Receivables not overdue (note 2)	12.2	4.6	0.6	0.7
Total not overdue	176.1		2.6	2.6
Tax debt less than 1 year overdue	22.6	18.5	4.2	3.8
Tax debt 1 to 2 years overdue	6.5	53.5	3.5	3.8
Tax debt more than 2 years overdue	14.7	85.0	12.5	12.1
Total tax debt (note 3)	43.8		20.2	19.7
Receivables under investigation less than 1 year overdue	1.3	18.5	0.2	0.1
Receivables under investigation 1 to 2 years overdue	0.9	53.5	0.5	0.1
Receivables under investigation more than 2 years overdue	3.4	85.0	2.9	0.8
Total receivables under investigation (note 4)	5.6		3.6	1.0
Receivables unlikely to be collectable (note 5)	7.5	100.0	7.5	8.8
Total	233.0	14.5	33.9	32.1

Notes:

1. Items not impaired are predominantly receivables owed from banks which do not attract impairment.
2. Receivables not overdue are taxpayer liabilities where the due date has not passed.
3. Tax debt is the amount of tax that is overdue for payment, legally enforceable and collectable.
4. Receivables under investigation are overdue receivables where investigations are being carried out by HMRC.
5. Receivables unlikely to be collectable are awaiting formal write-off action.

In 2025 to 2026, HMRC has included an estimate for accrued interest based on aged debt data, where no interest has been automatically generated. The estimate has been impaired as part of receivables under investigation.

The impairment of receivables rate (excluding ARR) is 45.5% in 2025 to 2026 (43.8% in 2024 to 2025). The total impairment rate is 14.5% (14.8% in 2024 to 2025).

Sensitivity analysis

HMRC has produced sensitivity analysis by analysing rates of debt collection and overdue receivables in years of low and high levels of economic uncertainty, to demonstrate the possible outcomes if the impairment scenario were to differ from the current period clearance rates.

Potential impact on the impairment balance

Scenario	Change to impairment balance £bn
Low estimate scenario	(2.8)
High estimate scenario	8.4

The low scenario is based on HMRC debt collection performance during periods of low economic volatility, whilst the high scenario is based on performance during periods of high economic volatility, over the past 6 years. Low economic volatility would increase speed of collection and reduce the impairment by as much as 7.8% (£2.8 billion) across aged debt and amounts not overdue. High economic volatility would reduce the speed of collection and increase the impairment by as much as 23.1% (£8.4 billion).

6. Payables, accrued revenue payable, deferred revenue, and cash and cash equivalents

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.

	Payables As at 31 March 2026 £bn	Accrued revenue payable As at 31 March 2026 £bn	DeferredRevenue As at 31 March 2026 £bn	Total As at 31 March 2026 £bn	Payables As at 31 March 2025 (restated) £bn (note)	Accrued revenue payable As at 31 March 2025 (restated) £bn (note)	Deferred revenue As at 31 March 2025 (restated) £bn (note)	Total As at 31 March 2025 (restated) £bn (note)
Income Tax	6.0	1.3	-	7.3	4.9	1.3	-	6.2
Value Added Tax	2.1	19.5	-	21.6	1.6	18.4	-	20.0
Corporation Tax	15.8	13.6	0.9	30.3	14.0	14.1 (note)	0.3	28.4 (note)
National Insurance Contributions	1.3	25.0	-	26.3	0.8	22.1	-	22.9
Other taxes and duties	3.8	0.2	3.5	7.5	4.2	0.3	4.0	8.5
Other payables	-	-	-	-	-	-	-	-
Payments on account	3.3	-	-	3.3	4.2	-	-	4.2
Current liabilities before cash and cash equivalents	32.3	59.6	4.4	96.3	29.7	56.2	4.3	90.2
Cash and cash equivalents	1.3	-	-	1.3	1.3	-	-	1.3
Total current liabilities	33.6	59.6	4.4	97.6	31.0	56.2	4.3	91.5

Note: Restated for a change in accounting policy for corporation tax reliefs. See note 1.2 and 6.2.1 for further details.

There are no liabilities in the table above which fall due after one year.

6.1. Payables 

Payables are amounts due to customers by HMRC at the end of the reporting period, but for which payment has not been made. Payments on account are taxpayer credit amounts that have not been allocated to a tax charge at the reporting period end date.

6.2. Accrued revenue payable

Accrued Revenue Payable (ARP) is recognised for:

• amounts due to VAT traders that have an established revenue repayment claim relating to the financial year, but the date the claim is received is after the end of the reporting period. It is necessary to estimate VAT ARP of £3.3 billion as returns submitted in June and July relating to the current financial year are not available at the time of producing the estimate
• amounts of receivables and accrued revenue receivable that when received will be passed to a third-party after adjusting for expenditure, for example NICs due to the National Insurance Funds and National Health Services
• amounts in respect of Corporation Tax, Income Tax and other small taxes likely to be repayable by HMRC pending finalisation of taxpayer liabilities accruing over the taxation period, and for expected Corporation Tax overpayments
• amounts of corporation tax relief where there is or could be, by their design, a payable element that is in excess of any negative taxation

Estimates have been made to support the ARP balances where tax returns reporting taxpayer liabilities or associated tax repayments related to the taxation period are not filed until after the Trust Statement has been published. Each year HMRC reviews the performance of its estimation models. Last year, the ARP underestimation was £0.4 billion, 0.05% of 2024 to 2025 total revenue (ARP overestimation of £0.1 billion in 2023 to 2024, 0.01% of 2023 to 2024 total revenue).

6.2.1. Change in accounting policy — corporation tax reliefs

In agreement with HM Treasury, HMRC changed its accounting policy for corporation tax reliefs to move the fully accrued CTR balance from the Resource Accounts to the Trust Statement.

Below provides a breakdown of the restated Corporation Tax accrued revenue payable position following the change in accounting policy.

As at 31 March	2025 £bn
Corporation Tax accrued revenue payable balance as at 1 April 2024	4.7
Opening balance correction for change in accounting policy — accrued CTR payable credits	6.9
Restated Corporation Tax accrued revenue payable balance as at 1 April 2024	11.6
2024-25 accrued CTR payable credits in-year movements — change in accounting policy	0.8
2024-25 Corporation Tax accrued revenue payable in-year movement	1.7
Restated Corporation Tax accrued revenue payable as at 31 March 2025	14.1

6.3. Deferred revenue

Deferred revenue includes taxes and duties paid in the current year which relate to future accounting periods.

6.4. Cash and cash equivalents

This reflects the net position of payments that have been authorised for issue to taxpayers, but the money has not cleared through the banking system and cash held in HMRC bank accounts as of 31 March. Due to the regular intraday transfers to HM Treasury, minimal cash is held in HMRC bank accounts. The balance does not represent an overdraft position.

7. Provision for liabilities and contingent liabilities

Provisions are recognised when HMRC has a present legal or constructive obligation arising from a past event, it is probable that HMRC will be required to settle that obligation, and an amount can be estimated reliably. Separate provisions, in respect of associated legal costs, are recognised in the Resource Accounts.

Contingent liabilities relate to legal cases with uncertain outcomes, where HMRC considers that a payment is possible rather than probable, or where the amount cannot be measured reliably.

Provision for liabilities

	Legal claims £bn	Oil and gas field decommissioning £bn	Total 2026 £bn	Total 2025 £bn
Balance as at 1 April	2.4	5.8	8.2	8.3
Provision in-year expenditure
Provided in the year	1.4	1.4	2.8	1.5
Provision not required written back	(0.2)	-	(0.2)	(0.6)
Total provision in-year expenditure	1.2	1.4	2.6	0.9
Provision utilised in the year	(0.4)	(0.5)	(0.9)	(1.0)
Balance as at 31 March	3.2	6.7	9.9	8.2

Analysis of expected timing of cash flows

	Legal claims £bn	Oil and gas field decommissioning £bn	Total 2026 £bn
Amounts payable within 5 years	3.2	3.2	6.4
Amounts payable after 5 years	-	3.5	3.5
Balance as at 31 March	3.2	6.7	9.9

7.1. Legal claims

Provision for liabilities

HMRC is involved in various legal and other disputes, which can lead to claims by taxpayers. Due to the nature of HMRC’s business, some of these matters may be litigated over several years.

After consulting with legal and other specialists, the department has established provisions based on the relevant facts and circumstances of each case and in accordance with accounting requirements. However, due to uncertainties in estimating these provisions, the ultimate liability may differ from the amounts provided. This is dependent on the outcomes of litigation, investigations, and potential settlements.

Provisions were reviewed during 2025 to 2026; discounting was not applied as the effect was assessed to be immaterial.

Contingent liabilities

Contingent liabilities are disclosed using a best estimate based on information available at the end of the reporting period. These estimates are subject to change and, for some legal cases, are inherently uncertain. Regular review of the contingent liabilities may lead to the recognition of new cases where appropriate. Existing cases may also be revalued, recognised as provisions, or removed from the contingent liability disclosure (where the probability that HMRC will be required to settle the liability is considered to be remote).

As at 31 March 2026, HMRC had 7 cases estimated to have a value of £6.5 billion (compared with 8 cases with an estimated value of £6.0 billion as at 31 March 2025), where the maximum potential tax repayment exceeds £100 million before losses, capital allowances and other tax reliefs. Each case may involve a lead case with follower claimants and cover a range of taxes and duties, including Corporation Tax and VAT. 

Further claimants may opt to follow a lead case but are not yet known to HMRC or the courts. Wider adoption claims of this nature are difficult to quantify with sufficient reliability and therefore fall outside of criteria in the relevant accounting standards. Accordingly, they are not recognised in the accounts or disclosed in these notes.

7.2. Exchequer liabilities arising from oil and gas infrastructure

There are 2 taxes levied on companies exploring and producing oil and gas from the UK Continental Shelf (UKCS): PRT and offshore Corporation Tax. Offshore Corporation Tax comprises 3 elements: Ring-fenced Corporation Tax, the Supplementary Charge and the Energy Profits Levy.

The legislation governing decommissioning losses (Oil Taxation Act 1975) allows participators in a PRT-liable oil and gas field to carry back decommissioning losses almost indefinitely against profits the field has previously generated, whether by the current or former participators. This may result in repayments of PRT. For offshore Corporation Tax, the Corporation Tax Act 2010 allows a company’s decommissioning loss to be carried back against its own historical profits dating back to April 2002. This may similarly result in repayments of offshore Corporation Tax.

Provision for oil and gas field decommissioning

The provision for tax repayments is an estimate based on the appropriately discounted sum of all forecast decommissioning repayments over the expected lifetime of the North Sea oil and gas fields.

A provision of £6.7 billion has been reported in 2025 to 2026. This is based on estimated tax repayments of £2.1 billion in PRT (£1.9 billion in 2024 to 2025) and £4.6 billion in offshore Corporation Tax (£3.9 billion in 2024 to 2025), expected to be made by HMRC to companies over the period to 2069 due to losses from decommissioning expenditure.

There has been a £0.9 billion increase in the overall provision since last year with an increase due to the impact of economic assumptions being partially offset by the utilisation of the provision for 2025 to 2026.

The key determinants of the provision estimate are:

• future decommissioning costs from the North Sea Transition Authority’s (NSTA) latest UKCS Stewardship Survey
• oil and gas prices, expenditure and production from the Office for Budget Responsibility (OBR), Department for Energy Security and Net Zero (DESNZ) and NSTA
• discount rates from HM Treasury
• the US Dollar/Sterling exchange rate from the OBR

Uncertainty around the estimate of the provision

There is inherent uncertainty surrounding forecasting oil and gas revenues over 30+ years ahead. Sensitivity analysis has been produced to demonstrate the impact of changes to key assumptions used in the current estimate.

Impact on the provision of varying determinants

Key assumption	Direction of impact	Increase £bn	Decrease £bn
Decommissioning costs (10% move compared to baseline)	Higher costs increase the provision	0.7	(0.7)
Oil and gas prices (10% move compared to baseline)	Higher prices reduce the provision	0.4	(0.4)
Oil and gas production (10% move compared to baseline)	Higher production reduces the provision	0.4	(0.4)
Discount rates (+/- 50 basis points)	Higher discount rates reduce the provision	0.3	(0.3)
US Dollar/Sterling exchange rate (10 cent move)	Higher US$/£ rate increases the provision	0.1	(0.2)

8. Balance on Consolidated Fund Account 

Balance due to/(due from) Consolidated Fund account

	Note	2026 £bn	2025 (restated) £bn (note)
Balance due to/(due from) Consolidated Fund as at 1 April 2024			88.9
Opening balance correction for the change in accounting policy – accrued CTR negative tax	4.2.3		(1.5)
Opening balance correction for the change in accounting policy – accrued CTR payable credits	6.2.1		(6.9)
Total opening balance correction			(8.4)
Restated Balance due to/(due from) Consolidated Fund as at 1 April 2024			80.5
Balance due to/(due from) Consolidated Fund as at 1 April 2025		84.1
Net revenue for the Consolidated Fund		732.6	680.4
Less amount paid to Consolidated Fund		(725.1)	(676.8)
Balance due to/(due from) Consolidated Fund Account as at 31 March		91.6	84.1

Note: Restated for a change in accounting policy for corporation tax reliefs. See note 1.2.

9. R.N. Limited

R.N. Limited is a registered company (company number 00279190) that administers, on behalf of HMRC, the holding of charges securing tax debts owed to HMRC. These tax debts are reflected in the Trust Statement. The company’s parent undertaking and controlling party is HMRC.

R.N. Limited also holds on behalf of HMRC, assets that have been assigned to HMRC in settlement of tax debts. These are not recognised in the Trust Statement until realised. There is no designation order requiring R.N. Limited’s financial statement to be consolidated within HMRC’s Accounts. R.N. Limited’s accounts can be viewed at Companies House.

10. Third party assets

The department holds cash and other assets which have been seized in relation to ongoing legal proceedings. These assets do not belong to the department and do not form part of these accounts although, where seized assets are forfeited without legal proceedings, proceeds are recognised as penalty income.

The department holds amounts in relation to businesses operating under the terms of the Northern Ireland (NI) protocol who have registered with HMRC to use the One Stop Shop (OSS) scheme to report and pay VAT due to the EU. This entails the making of payments to HMRC who will then forward any relevant amounts to the EU. The scheme was implemented on 1 July 2021 and covers goods sold from NI to consumers in the EU.

11. Related party transactions

Due to the nature of HMRC’s business, we have a large number of transactions, relating to taxation income, with other government departments and other central government bodies. Ministers’ interests are declared and maintained through the Register of Members’ Interests at the House of Commons and the Register of Lords’ Interests at the House of Lords.

12. Devolved taxes

12.1. Scottish Income Tax

The Scottish Parliament has the power to set and change its own tax rate bands and limits, introduce new ones, and include a zero rate, to all non-savings non-dividend (NSND) Income Tax paid by Scottish taxpayers (Scotland Acts 2012, 2016). These powers were fully effective from 6 April 2017.

Starting from the 2018 to 2019 tax year and continuing up to the 2023 to 2024 tax year there have been 5 Income Tax bands in Scotland with different limits and rates applied to each. From 2024 to 2025 a new Advanced rate band set at 45% was introduced for income between £75,000 and £125,140, bringing the total number of Scottish Income Tax bands to 6. These range from the Starter rate of 19% up to the Top rate of 48%. This means that a Scottish taxpayer can pay a different amount of total Income Tax compared to someone from England and Northern Ireland earning the same amount of income. More information on the Scottish Income Tax rates for the 2025 to 2026 tax year can be found on GOV.UK.

12.2. Welsh rates of Income Tax

The Wales Act 2017 gives the Welsh Parliament the power to set Welsh Rates of Income Tax (WRIT). This allows the Welsh Government to affect the amount of Income Tax that Welsh taxpayers pay and, as a result, the amount that the Welsh Government can spend in Wales. WRIT is calculated on a tax year basis and was introduced with effect from 6 April 2019.

The Welsh rates up to the 2025 to 2026 tax year were set at 10% for each of the tax bands. This means that a Welsh taxpayer paid the same amount of total Income Tax as someone from England and Northern Ireland earning the same amount of income, but for the Welsh taxpayer 10 percentage points of each tax band is allocated to the Welsh Government with the remainder retained by the UK Government.

12.3. Scottish and Welsh rates of Income Tax outturn for 2024 to 2025

The final outturn figures for 2024 to 2025 have been calculated as £18.6 billion for Scottish Income Tax (SIT) and £3.3 billion for Welsh rates of Income Tax (£17.1 billion Scottish Income Tax and £3.0 billion Welsh rates of Income Tax in 2023 to 2024).

For full details on the 2024 to 2025 outturn please refer to the HMRC publications released on 9 July 2026 Scottish and Welsh Income Tax Outturn Statistics on GOV.UK. The outturn publications are not subject to NAO audit.

HM Treasury is responsible for ensuring that the proceeds are made available to fund expenditure by the Scottish and Welsh Governments; these transfers are not accounted for in the HMRC Trust Statement.

The costs of collecting and administering are charged to the Scottish and Welsh Governments and accounted for in the Resource Accounts, but these are not individually disclosed due to materiality.

In agreement with the Scottish and Welsh Governments, provisional estimates of SIT and WRIT will no longer be produced for the Trust Statement. The most recent OBR forecasts of SIT and WRIT can be found in their March 2026 Devolved tax and spending document.

13. Events after the reporting period

There are no reportable events after the reporting period. These accounts have been authorised for issue by the Accounting Officer on the same date as the Comptroller and Auditor General’s Audit Certificate.

Accounts direction given by HM Treasury

Accounts direction given by HM Treasury in accordance with section 2 of the Exchequer and Audits Departments Act 1921

1. This direction applies to those government departments listed in appendix 2.

2. The Department shall prepare a Trust Statement (‘the Statement’) for the financial year ended 31 March 2026 for the revenue and other income, as directed by the Treasury, collected by the department as an agent for others, in compliance with the accounting principles and disclosure requirements of the edition of Government Financial Reporting Manual (‘FReM’) 2025 to 2026.

3. The Statement shall be prepared, as prescribed in appendix 1, so as to give a true and fair view of (a) the state of affairs relating to the collection and allocation of taxes, licence fees, fines and penalties and other income by the Department as agent and of the expenses incurred in the collection of those taxes, licence fees, fines and penalties insofar as they can properly be met from that revenue and other income; (b) the revenue and expenditure; and (c) the cash flows for the year then ended.

4. The Statement shall also be prepared so as to provide disclosure of any material expenditure or income that has not been applied to the purposes intended by Parliament or material transactions that have not conformed to the authorities which govern them.

5. When preparing the Statement, the Department shall comply with the guidance given in the FReM (Chapter 11). The Department shall also agree with HM Treasury the format of the Principal Accounting Officer’s Foreword to the Statement, and the supporting notes, and the accounting policies to be adopted, particularly in relation to revenue recognition. Regard shall also be given to all relevant accounting and disclosure requirements in Managing Public Money and other guidance issued by HM Treasury, and to the principles underlying International Financial Reporting Standards.

6. Compliance with the requirements of the FReM will, in all but exceptional circumstances, be necessary for the accounts to give a true and fair view. If, in these exceptional circumstances, compliance with the requirements of the FReM is inconsistent with the requirement to give a true and fair view, the requirements of the FReM should be departed from only to the extent necessary to give a true and fair view. In such cases, informed and unbiased judgement should be used to devise an appropriate alternative treatment which should be consistent with both the economic characteristics of the circumstances concerned and the spirit of the FReM. Any material departure from the FReM should be discussed in the first instance with HM Treasury.

7. The Statement shall be transmitted to the Comptroller and Auditor General for the purpose of his examination and report by a date agreed with the Comptroller and Auditor General and HM Treasury to enable compliance with the administrative deadline for laying the audited accounts before Parliament.

8. The Statement, together with this direction (but with the exception of the related appendices) and the Report produced by the Comptroller and Auditor General under section 2 of the Exchequer and Audit Departments Act 1921 shall be laid before Parliament at the same time as the Department’s Resource Accounts for the year unless the Treasury have agreed that the Trust Statement may be laid at a later date.

Charlotte Goodrich
Deputy Director, Government Financial Reporting
HM Treasury
18 December 2025

Glossary to the financial statements

Accrued Revenue Payable (ARP) — there are 3 distinct types of ARP. These comprise: 

• firstly, amounts due to traders that have an established revenue repayment claim relating to the financial year, but the date the claim is received is after the end of the reporting period
• secondly, amounts of receivables and accrued revenue receivable that will, when received, be passed to a third-party, for example national insurance contributions due to the National Insurance Funds and National Health Services
• thirdly, amounts in respect of Corporation Tax and Income Tax likely to be repayable by HMRC pending finalisation of tax payer liabilities

Accrued Revenue Receivable (ARR) — ARR represents taxes and duties relating to the financial year that are not yet due or received from taxpayers, where these have not been included in receivables. 

Administration costs — these relate to the internal administration costs of running the department, for example, human resources, finance, estates management and includes both costs and associated operating income.

Amortisation — this is the method of spreading the cost of a non-current intangible asset over its useful life. 

Annually Managed Expenditure (AME) — departments are allocated a separate annually managed spending limit. AME is more volatile than DEL expenditure (see below) and is more difficult to explain or control as it is spent on programmes which are demand-led — such as tax credits or Child Benefit.

Appropriation to Resource Accounts — these are amounts reported in the Resource Accounts for the purposes of financing tax reliefs and tax credits.

Consolidated Fund — the Consolidated Fund is one of the government’s central funds at the Bank of England. It is a payments and receipts account to which tax receipts are transferred and from which voted departmental and other government expenditure is funded.

Consolidated Statement of Cash Flows (CSoCF) — a statement that reports the cash flows during the financial year from operating, investing and financing activities.

Consolidated Statement of Changes in Taxpayers’ Equity (CSoCTE) — a statement which explains the movements in the department and departmental group’s net assets between the start and end of a financial year. 

Consolidated Statement of Comprehensive Net Expenditure (CSoCNE) — this is the performance statement, the equivalent of the ‘Profit and Loss’ Account and Statement of Total Recognised Gains and Losses. It reports a summary of the departmental group’s expenditure and income for the financial year, along with its gains and losses. 

Consolidated Statement of Financial Position (CSoFP) — previously known as the Balance Sheet, it provides a snapshot of the assets and liabilities of the group as at the end of the reporting period. 

Contingent liabilities — contingent liabilities are either present obligations that arise from past events where a payment to settle is less than probable, or possible obligations that arise from past events and whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the reporting entity’s control. An example is legal action where the department may need to pay legal costs if it loses the case. These are not disclosed where disclosure could seriously prejudice the outcome of legal claims against the department.

Current assets — a current asset is cash and any other entity asset that will be turning to cash within one year from the department’s reporting date. 

Current liabilities — a current liability is an obligation that is due within one year of the department’s reporting date. 

Deferred revenue — this includes duties and taxes paid in the current year that relate to future accounting periods. 

Departmental Expenditure Limits (DEL) — this is the spending budget that is allocated to and spent by Government departments. This amount, and how it is split between Government departments, is set at Spending Reviews usually on a 3 yearly basis. It is normally categorised as Capital DEL and Resource DEL. Departmental expenditure includes the running of the services and the everyday cost of resources such as staff. The DEL limit is tightly controlled by HM Treasury. A department’s expenditure is deemed to be DEL unless HM Treasury has specified otherwise (see also AME above). 

Depreciation — this is the method of spreading the cost of a non-current tangible asset over its useful economic life. 

Disbursements — amounts paid and payable to the relevant bodies that HMRC has collected on their behalf.

Excess Vote — if a department breaches control totals within its Estimates of expenditure or net cash requirement that are voted and approved by Parliament this will result in an Excess Vote. 

Finalisation (personal tax credits) — this is the process, occurring after the financial year end, by which claimants confirm their actual income and other circumstances for the previous award year. The award is finalised for the award year that has ended and appropriate adjustments for under or overpayments of tax credits are made. 

FReM — this is the HM Treasury technical accounting guide to the preparation of financial statements for government.

IAS — International Accounting Standards (see IFRS below). 

IASB — International Accounting Standards Board.    IFRIC — the IFRS Interpretations Committee (IFRIC) develop guidance on appropriate accounting treatment of particular issues. They are approved by the International Accounting Standards Board (IASB).

IFRS — International Financial Reporting Standards (also including International Accounting Standards). The Financial Statements of Government adopted IFRS from 2009-10 as the basis for preparation of their accounts which were previously prepared under UK based Generally Accepted Accounting Practice (UK GAAP). 

Impairment of accrued revenue receivables — the process of reducing accrued revenue receivables to a fair value that is likely to be collected. 

Impairment of receivables — the process of reducing receivables to a fair value that is likely to be collected. 

Import One Stop Shop (IOSS) — a monthly VAT reporting and payment system for imports.

Indemnities — will be ordered by the court, on behalf of the insolvency practitioner or solicitors, in case the department has incorrectly wound up a viable business. These indemnities are unlimited, although we calculate a likely value for reporting purposes. The calculation is based on the likely amount that a business could be awarded in proceedings and the likelihood of a successful claim for that amount being made. The indemnity will be in place until the case is settled and the liquidation confirmed.

Intangible assets — these are non-physical assets, for example, developed computer software and website development costs.

Losses — losses are made up of remissions and write-offs. Remission is the process used to identify and separate receivables which the department has decided not to pursue, for example on the grounds of value for money. Write-offs are receivables that are considered to be irrecoverable, for example because there is no practical means for pursuing them.

Managing Public Money —– this is a HM Treasury publication giving guidance on how to handle public funds. 

Negative tax — this occurs where the amount of a tax credit is less than or equal to the recipient’s tax liability. 

Net Cash Requirement — the amount of funding that the department is entitled to draw down from the Consolidated Fund.

Non-current assets — an asset that is not likely to turn to cash or cash equivalent within one year of the department’s reporting date. 

Non-current liabilities — a liability not due to be paid within one year of the department’s reporting date. 

Non-Voted expenditure — expenditure which is not subject to annual Parliamentary approval and in HMRC’s case mainly relates to tax credits and costs in respect of the National Insurance Fund. 

One Stop Shop (OSS) — a quarterly VAT reporting and payment system for distance selling.

Payables — amounts recognised as owed by the department at the end of the reporting period for which payment has not yet been made.

Payments of entitlement — this is the element of a relief which is in excess of the recipient’s tax liability. 

Private Finance Initiative (PFI) — is a way of creating public-private partnerships (PPPs) by funding public infrastructure projects with private capital.

Programme costs — these relate to the costs incurred in the delivery of front line services such as the parts of the department which interact directly with our external customers. In addition it includes the payments made for tax credits, Child Benefit and other disbursements by the department. All expenditure and associated operating income for the Valuation Office Agency is treated as Programme. 

Provisions for liabilities — these are recognised when HMRC has a present legal or constructive obligation as a result of a past event, it is probable that HMRC will be required to settle that obligation and an amount has been reliably estimated.

Quarterly Instalment Payments (QIPs) —– Corporation Tax for large onshore companies paid by 4 quarterly instalment payments each year.

Receivables — these represent all amounts recognised as owing to the department at the end of the reporting period but payment has not yet been received.

Resource Accounts — the financial statements which report the cost of running the department and include payments of tax credits, Child Benefit and certain reliefs. 

Statement of Cash Flows — a statement that reports the cash flows relating to revenue from taxes, duties, fines and penalties.

Statement of Financial Position — a statement that reports an snapshot of the assets and liabilities relating to revenue from taxes, duties, fines and penalties as at the end of the reporting period.

Statement of Parliamentary Supply (SoPS) — this is the primary parliamentary accountability statement and is unique to central government financial reporting. It reports the total outturn (how much has been spent) for the departmental group compared with the amounts approved by Parliament in the Estimate, in the various categories of expenditure.

Statement of Revenue, Other Income and Expenditure — this statement, the equivalent of a ‘Profit and Loss’ Account, reports a summary of the department’s income and expenditure relating to revenue from taxes, duties, fines and penalties.

Supply Estimates process — this is the means by which a government department seeks funds from Parliament and authority is given for departmental expenditure each year. 

Suspended debt — an indirect tax, penalty or surcharge that is under challenge, dispute or appeal. The value is currently excluded from the receivables and debt balance as currently no recovery action can be taken. 

Tax debt — the amount of tax that is overdue for payment, legally enforceable and collectable. Tax debt is included within the Trust Statement receivables balance. ‘Receivables’ is defined earlier in this glossary.

Taxation period — this is the financial year ended 31 March and represents the period over which taxable events occur that generate net tax revenues recognised in the Statement of Revenue, Other Income and Expenditure.

Three Instalment Payments (TIPs) — Corporation Tax for North Sea companies paid by 3 instalment payments each year.

Trust Statement — the financial statement which reports the revenues, expenditure, assets and liabilities related to taxes and duties collected by departments on behalf of government.

UK GAAP — the generally accepted accounting principles in the UK which are the body of accounting standards and guidance published by the Financial Reporting Council.

Voted expenditure — monies voted to the department by Parliament to cover our expenditure, following the submission of our Estimates. Parliament votes annually on each government department’s future expenditure.

Resource Accounts

Consolidated Statement of Comprehensive Net Expenditure for the year ended 31 March 2026

This statement summarises the expenditure incurred and income generated on an accruals basis. Other comprehensive expenditure and income includes changes to the values of non‑current assets that cannot yet be recognised as income or expenditure.

Consolidated Statement of Comprehensive Net Expenditure

	Note	2025-26 Department £m	2024-25 Department £m
Cash items:
Child Benefit		13,443.1	13,307.1
Corporation tax reliefs	3.1.3	10,764.1	10,123.3
Personal tax credits	1.5.1, 3.1.1	(93.4)	2,460.4
Tax‑Free Childcare		600.0	617.9
Lifetime ISA		693.7	624.4
Payments in lieu of tax relief and rates		290.4	280.3
Help to Save		41.1	45.0
Staff and related costs		4,004.5	3,535.2
Goods and services		1,742.0	1,535.1
Service charges (contract payments)	2	154.1	137.1
Other cash expenditure		284.8	281.2
Non-cash items:
Transfer of personal tax credit receivables to DWP		46.9	412.0
Amortisation	6	566.5	470.8
Depreciation (note 1)	5, 7.1	143.3	142.3
Personal tax credit provisions	3.1.1, 13	(66.8)	209.3
Other provisions (note 2)	13	185.5	112.2
Other		21.5	104.1
Total operating expenditure		32,821.3	34,397.7
Total operating income		(378.4)	(394.1)
Net operating expenditure		32,442.9	34,003.6
Finance income		(0.7)	(0.8)
Finance expense		14.4	12.7
Net expenditure for the year		32,456.6	34,015.5
Other comprehensive net expenditure
Items that will not be reclassified to net operating expenditure:
Net loss/(gain) on:
– revaluation of property, plant and equipment		(9.1)	9.9
– revaluation of intangible assets (note 3)		1.9	–
– actuarial revaluation of pension scheme		(8.4)	4.7
Total comprehensive expenditure for the year		32,441.0	34,030.1

Notes:

1. Depreciation is comprised of £72.2 million on property, plant & equipment and £71.1 million on Right‑of‑use (leased assets) (see notes 5 & 7).
2. Value differs from provisions reported in note 13 for liabilities and charges as it excludes the capital provision for dilapidations of £6.1 million.
3. This is an immaterial final adjustment resulting from having ceased the revaluation of intangible assets in 2024 to 2025 in accordance with early adoption of this revision in the FReM.

Consolidated Statement of Financial Position as at 31 March 2026

This statement presents the financial position of the department. It comprises 3 main components: assets owned or controlled; liabilities owed to other bodies; and equity, the remaining value of the entity.

Consolidated Statement of Financial Position

	Note	2025-26  Department £m	Restated 2024-25 Department £m (note)	Restated 1 April 2024 Department £m (note)
Non-current assets:
Intangible assets	6	3,072.8	2,964.4	2,859.4
Right‑of‑use assets	7.1	998.9	948.8	989.4
Property, plant and equipment	5	689.2	669.0	717.3
Trade and other receivables	10	201.1	290.4	1,112.4
Pension asset	14	11.8	3.6	8.5
Total non-current assets		4,973.8	4,876.2	5,687.0
Current assets:
Trade and other receivables	10	852.4	874.9	1,095.6
Cash and cash equivalents	11	57.2	68.6	41.0
Total current assets		909.6	943.5	1,136.6
Total assets		5,883.4	5,819.7	6,823.6
Current liabilities:
Trade and other payables	12	(1,570.1)	(1,370.3)	(1,536.3)
Provisions	13	(229.2)	(367.7)	(63.1)
Lease liabilities	7.2	(64.7)	(59.4)	(22.3)
Total current liabilities		(1,864.0)	(1,797.4)	(1,621.7)
Total assets less current liabilities		4,019.4	4,022.3	5,201.9
Non-current liabilities:
Trade and other payables	12	(18.0)	(15.8)	(17.7)
Lease liabilities	7.2	(1,164.2)	(1,130.3)	(1,181.5)
Provisions	13	(113.7)	(75.1)	(108.0)
Total non-current liabilities		(1,295.9)	(1,221.2)	(1,307.2)
Total assets less total liabilities		2,723.5	2,801.1	3,894.7
Taxpayers’ equity and other reserves:
General Fund		2,592.0	2,620.7	3,646.2
Revaluation reserve		131.5	180.4	248.5
Total equity		2,723.5	2,801.1	3,894.7

Note: Certain prior year figures have been restated as per note 1.2.

John-Paul Marks
Accounting Officer
1 July 2026

Consolidated Statement of Cash Flows for the year ended 31 March 2026

The Statement of Cash Flows shows the changes in cash and cash equivalents of the department during the reporting period. The statement shows how the department generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of service costs and the extent to which these operations are funded by way of income from the recipients of services provided by the department. Investing activities represent the extent to which cash inflows and outflows have been made for resources which are intended to contribute to the departments’ future public service delivery.

Consolidated Statement of Cash Flows

	Note	2025-26 Department £m	2024-25 Restated Department £m (note 1)
Cash flows from operating activities
Net operating expenditure		(32,442.9)	(34,003.6)
Adjustments for non‑cash transactions (note 2)		11,597.8	13,448.1
(Increase)/decrease in trade and other receivables	10	111.8	1,042.7
Less movements in receivables not passing through the Statement of Comprehensive Net Expenditure (SoCNE)		(0.1)	14.0
Personal tax credits receivables, (net of impairment), transferred to DWP	3.1.2	(46.9)	(412.0)
Increase/(decrease) in trade and other payables	12	202.0	(167.9)
Less movements in payables not passing through the SoCNE		(73.3)	(27.6)
Use of provisions	13	(224.6)	(9.0)
Net cash outflow from operating activities		(20,876.2)	(20,115.3)
Cash flows from investing activities
Additions to property, plant and equipment		(96.7)	(65.1)
Less additions to leased property, plant and equipment		11.5	1.5
Additions to intangible assets		(683.1)	(649.7)
Proceeds of disposal of property, plant and equipment		0.4	7.5
Financing income		0.7	0.8
Net cash outflow from investing activities		(767.2)	(705.0)
Cash flows from financing activities
From the Consolidated Fund (Supply) – current year	CSoCITE, 11.1	21,469.9	20,686.0
From the National Insurance Fund	11.1	260.4	257.7
Capital element of payments in respect of leases and on‑Statement of Financial Position PFI contracts	11.1	(83.1)	(76.7)
Financing expenditure		(14.4)	(12.7)
Net financing		21,632.8	20,854.3
Net increase/(decrease) in cash and cash equivalents in the period before adjustment for receipts and payments to the Consolidated Fund		(10.6)	34.0
Payments of amounts due to the Consolidated Fund		(0.8)	(6.4)
Net increase/(decrease) in cash and cash equivalents in the period after adjustment for receipts and payments to the Consolidated Fund		(11.4)	27.6
Cash and cash equivalents at the beginning of the period	11	68.6	41.0
Cash and cash equivalents at the end of the period	11	57.2	68.6

Notes:

1. Certain prior year figures have been restated as per note 1.2.
2. Includes £10,706.1 million of expenditure through the Trust Statement, therefore being of no Cash Flow consequence in the Resource Account.

Consolidated Statement of Changes in Taxpayers’ Equity for the year ended 31 March 2026

This statement shows the movement in the year on the different reserves held by the department, analysed into General Fund and Revaluation reserve. The General Fund represents the total assets less liabilities of the department, to the extent that it is not represented by other reserves and financing items. The Revaluation reserve reflects the change in asset values that have not been recognised as income or expenditure.

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.

Note	2025-26 Department  General Fund	2025-26 Department Revaluation reserve £m (note 1)	2025-26 Department Taxpayers’ equity £m	Restate 2024-25 Department  General Fund £m	Restated 2024-25 Department  Revaluation reserve £m (note 1)	Restated 2024-25 Taxpayers’ equity £m
Opening Balance		2,620.7	180.4	2,801.1	(7,577.0)	248.5	(7,328.5)
Removal of Corporation Tax Relief accrual balance		–	–	–	11,223.2	–	11,223.2
Restated balance at 1 April		2,620.7	180.4	2,801.1	3,646.2	248.5	3,894.7
Net Parliamentary funding — drawn down		21,469.9	–	21,469.9	20,686.0	–	20,686.0
Net Parliamentary funding — deemed (note 2)		68.7	–	68.7	35.6	–	35.6
Funding from Trust Statement (note 3)		10,706.1	–	10,706.1	12,003.0	–	12,003.0
National Insurance Fund		174.2	–	174.2	278.8	–	278.8
Supply (payable)/receivable adjustment		(57.4)	–	(57.4)	(68.7)	–	(68.7)
Income payable to the Consolidated Fund		(0.8)	–	(0.8)	(0.9)	–	(0.9)
Net expenditure for the year		(32,456.6)	–	(32,456.6)	(34,015.5)	–	(34,015.5)
Other net comprehensive expenditure:
Revaluation of property, plant and equipment		–	9.1	9.1	–	(9.9)	(9.9)
Revaluation of intangible assets (note 4)		–	(1.9)	(1.9)	–	–	–
Transfer between reserves		56.1	(56.1)	–	58.2	(58.2)	–
Pension reserve actuarial (losses)/gains		8.4	–	8.4	(4.7)	–	(4.7)
Contributions to Local Government Pension Scheme pension fund by DWP		0.4	–	0.4	0.4	–	0.4
Non‑cash charges — auditor’s remuneration	2	2.3	–	2.3	2.3	–	2.3
Balance at 31 March		2,592.0	131.5	2,723.5	2,620.7	180.4	2,801.1

Notes:

1. The 31 March 2026 balance comprised £10.9 million in relation to property, plant and equipment assets (31 March 2025 £9.1 million) and £120.5 million in relation to intangible assets (31 March 2025 £171.3 million).
2. This represents previously drawn down Supply that is available to be spent in the current financial year.
3. Personal tax credits and corporation tax reliefs are funded out of tax receipts from the Trust Statement. Please see the Statement of Revenue, Other Income and Expenditure in the Trust Statement.
4. This is an immaterial final adjustment resulting from having ceased the revaluation of intangible assets in 2024 to 2025 in accordance with the early adoption of this revision in the FReM.

Certain prior year figures have been restated as per note 1.2.

Notes to the departmental Resource Accounts

Notes to the financial statements provide additional information required by statute and accounting standards to explain a particular feature of the financial statements. The notes which follow will also provide explanations and additional disclosure to assist readers’ understanding and interpretation of the financial statements.

1. Statement of accounting policies

1.1. Basis of accounting

These financial statements are prepared in accordance with the Government FReM for the 2025 to 2026 financial year. The FReM applies International Financial Reporting Standards (IFRS) as adapted and interpreted for the public sector context.

Net liabilities shown on the Statement of Financial Position are expected to be met through future funding from the Trust Statement, or by funding voted by Parliament through Supply and Appropriation Acts.

As there is no reason to believe that the required resources will not be provided, the Resource Account is prepared on a going concern basis.

Where the FReM allows a choice of accounting policy, HM Revenue and Customs applies the option that gives a true and fair view of these accounts.

1.2. Changes in accounting policy

Following HM Treasury’s Clear Line of Sight reforms implemented in 2011 to 2012, corporation tax reliefs (CTRs), comprising negative revenues and payable credits covering both Quarterly Instalment Payers and non‑Quarterly Instalment Payers, have been accounted for in the Resource Accounts.

CTRs do not represent a separate relief or credit scheme, but form an integral component of Corporation Tax. In practice, Corporation Tax liabilities, reliefs, offsets and repayments are managed and maintained collectively as an account balance, with settlement taking place through the Trust Statement, while accrued liabilities have been recognised in the Resource Accounts Statement of Financial Position (SoFP) since 2011 to 2012.

With HM Treasury agreement, HMRC has revised its accounting policy so that CTR accrued liabilities are no longer recognised in the Resource Accounts (SoFP) and are instead recognised in the Trust Statement (SoFP). This change better reflects the substance of how CTRs are settled.

The Resource Accounts will continue to recognise accrued CTR expenditure in accordance with Consolidated Budgeting Guidance. As set out in the FReM, accrued CTR expenditure will continue to be de‑recognised from Trust Statement revenues where it initially arises and appropriated to the Resource Accounts’ Statement of Comprehensive Net Expenditure (SoCNE).

In accordance with IAS 8, this voluntary change in accounting policy has been applied retrospectively. As a result, prior period comparatives for 2024 and 2025 have been restated — see table below for a summary of the changes.

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.

Financial Statement	31 March 2025 restated £bn	31 March 2025 published £bn	31 March 2025 change £bn	1 April 2024 restated £bn	1 April 2024 published £bn	1 April 2024 change £bn	Note reference £bn
Statement of Financial Position
Current liabilities:
Trade and other payables	‑1.4	‑10.9	9.5	‑1.5	‑10.8	9.3	12
Non‑current liabilities:
Trade and other payables	0.0	‑2.3	2.3	–	‑1.9	1.9	12
Total equity (includes more than CTR)	2.8	‑9.0	11.8	3.9	‑7.3	11.2
Statement of Cash Flows
Adjustments for non‑cash transactions	13.4	12.9	0.6	–	–	–
Increase/(decrease) in trade and other payables	‑0.2	0.4	‑0.6	–	–	–	12
Net cash outflow from operating activities	‑20.1	‑20.1	–	–	–	–
Statement of Changes in Taxpayer Equity
Removal of Corporation Tax Relief accrual balance	11.2	–	11.2	–	–	–
Funding from Trust Statement	12.0	11.4	0.6	–	–	–
Balance at 31 March	2.8	‑9.0	11.8	–	–	–

For further information regarding CTR please see note 3.1.3.

1.3. Accounting convention

These accounts are prepared on an accruals basis, under the historical cost convention, modified for the revaluation of property, plant and equipment where required.

1.4. Basis of consolidation

This account consolidates the results of all bodies within the departmental boundary as defined by the FReM. For HMRC this includes the core department and the Valuation Office Agency (VOA).

1.5. Tax credits

1.5.1. Personal tax credits

Personal tax credits (PTC) closed on 5 April 2025, with remaining eligible customers moving to Universal Credit, administered by the Department for Work and Pensions (DWP). Outstanding personal tax credit debt is being transferred to DWP for recovery through live Universal Credit awards, while any residual debt retained by HMRC will be collected through normal recovery routes. In the final stages of closure, reported expenditure will be negative where recoveries exceed remaining payments as cases are cleared.

1.5.2. PTC receivables

Where overpayments of PTC arise, these are not by arrangement and are not credit assessed or loan agreements. Customers are given a certain time to settle the overpayment or enter into an arrangement to pay debt. The debt is considered to be overdue after 30 days. The HMRC business model for managing personal tax credit overpayment debt is to collect the contractual cash flows only, with no intention to sell the debt asset. PTC debt is being transferred to DWP as part of the transition to Universal Credit, this is a transfer between government bodies and not a sale of the debt.

As per the FReM, the IFRS 9 simplified approach to impairing assets is used to impair tax credit overpayment debt over the lifetime of the debt. The contractual cash flows are solely repayments of principal debt and therefore the debt is measured at amortised cost.

For PTC receivables, there is not a definition of default due to the nature of the legislation surrounding the recovery of overpayments. PTC receivables are reported net of losses which are defined and detailed in the Losses statement which is reported in the Parliamentary accountability section.

1.5.3. Corporation tax reliefs

There is no specific IFRS that applies to corporation tax reliefs. HMRC recognises expenditure as companies engaged in qualifying activities incur qualifying expenditure. This aligns recognition in these accounts with corporation tax income recognised in the Trust Statement as taxable events occur, not when returns are filed.

Expenditure is estimated using historic relief claims, forecast growth and uplift factors, and adjustments for planned policy and rate changes. Estimation is required because of the time lag between companies’ year ends and the filing of tax returns. This amount is considered to be a reasonable proxy for final outturn in the absence of readily available actual outturn values.

All reliefs expenditure is funded by the Trust Statement and recognised in reserves. Corporation Tax reliefs (CTRs), comprising negative revenues and payable credits, are an integral component of Corporation Tax and are managed and maintained together with Corporation Tax liabilities, offsets and repayments as a single account balance. Where CTRs arise within Trust Statement revenues, they are de‑recognised and appropriated to the Statement of Comprehensive Net Expenditure in line with the FReM and Consolidated Budgeting Guidance.

With effect from 2025 to 2026, HMRC has revised its accounting policy so that CTR accruals are recognised in the Trust Statement, Statement of Financial Position, better reflecting the substance that CTRs are settled through the Corporation Tax account rather than as a separate scheme.

This change in accounting policy has been applied retrospectively in accordance with IAS 8.

1.6. Child Benefit

Child Benefit is a non contributory social benefit administered by HMRC and payable to eligible households, recognised when entitlement arises.

Expenditure includes amounts payable to individuals with incomes over £60,000, although these amounts may later be recovered through the High‑Income Child Benefit Charge, which is treated as income tax and is recorded separately in the Trust Statement. From 2025 to 2026 expenditure includes an accrual for social benefit expenditure relating to eligible payments due, but unpaid, at the reporting date.

Overpayments are recognised as receivables and recovered through future entitlement or direct repayment.

Receivables are reported net of losses (remissions and write‑offs) as disclosed in the Parliamentary accountability section.

Child Benefit receivables are reported net of losses as detailed in the losses statement which is reported in the Parliamentary accountability section on page 166. Losses are made up of remissions and write‑offs.

1.7.Tax-Free Childcare (note)

Expenditure is recognised in the financial year in which top‑up payments are due.

1.8. Lifetime ISA (LISA) (note)

Expenditure is recognised in HMRC’s financial statements net of penalties at the point a claim is paid to the relevant LISA provider.

Note: Payments in respect of Tax‑Free Childcare and Lifetime ISA (LISA) are made in accordance with the relevant legislation.

1.9. Revenue recognition

HMRC recognises revenue in accordance with IFRS 15 when it is earned.

1.10. Non-current assets

1.10.1. Property, plant and equipment (PPE) Recognition and measurement

Recognition and measurement

PPE includes freehold and specific long‑leasehold property, IT hardware, vehicles, office equipment, scientific aids, and furniture.

Subsequent measurement policies depend on the asset class. Capitalisation thresholds are:

• accommodation refurbishments: £150,000 (VOA: £15,000)
• information technology hardware: £5,000 individually, and bulk purchases exceeding £1m million where the unit cost is more than £500
• other tangible assets: £5,000 individually, and bulk purchases exceeding £1 million irrespective of unit cost

Revaluation

Under FREM 2025 to 2026, entities must now measure plant, property and equipment (PPE) using a current value model.

Property

Freehold and long leasehold properties held for their operational capacity are measured at current value in existing use in accordance with Royal Institute of Chartered Surveyors professional valuation standards. This approach was applied prospectively from 1 April 2025 no restatement of prior year figures, in accordance with IAS 16 as adapted by the FREM.

The date of the last property valuations was 31 December 2025.

Accommodation refurbishment

For accommodation refurbishment we currently apply the depreciated historic cost as a proxy for current value in existing use.

Other tangible assets

For IT hardware, vehicles, office equipment, scientific aids, and furniture we apply the depreciated historic cost as a proxy for current value in existing use as permitted for low value and/or short life assets.

Depreciation

Depreciation is charged on a straight line basis over the asset’s estimated useful life, beginning when the asset is available for use.

Indicative useful economic lives:

Asset Category	Useful economic life
Freehold and specific long leasehold buildings	50 years
Freehold Land	Not depreciated
Office equipment	5‑20 years
IT hardware	4‑7 years
Vehicles	5‑8 years
Furniture	10‑15 years
Scientific aids	3‑10 years
Accommodation refurbishment	Duration of the lease where applicable

Private Finance Initiative (PFI) assets

Where the group controls a PFI asset and the residual interest, the asset is recognised as PPE and the related liability as a lease obligation. Contractual payments are apportioned between financing and service charges in the CSoCNE and a lease liability in the Statement of Financial Position. HMRC has also capitalised other PFI property interests as concession arrangements.

1.10.2. Intangible assets

Recognition and measurement

Intangible assets primarily comprise developed software, software licences and website development costs. Recognition occurs if it is probable that the future economic benefits that are attributable to the asset will flow to the entity and the cost of the asset can be measured reliably. There are specific recognition criteria for internally generated intangible assets under IAS 38.

Capitalisation thresholds are:

• software licences: £250,000

Revaluation

Following an HM Treasury thematic review with the Financial Reporting Advisory Board, the FReM 2025 to 2026 prescribes that the cost model should be used for measurement of intangible assets. HMRC applied this change early with HM Treasury’s consent and, as a result, deemed cost was taken from 1 April 2024 and the cost model has been applied from this point.

Amortisation

Intangible assets are amortised on a straight line basis over their useful lives. Indicative useful economic lives:

Asset category	Useful economic life
Developed software	Up to 10 years unless known to be otherwise
Software licences	Term of licence
Website development	Up to 10 years unless known to be otherwise

Development costs

Development, integration and testing costs related to internally generated software are capitalised when recognition criteria under IAS 38 are met.

1.10.3. Assets under construction

Assets under construction relate to capital projects and software development undertaken by HMRC or by its delivery partners and owned by HMRC. Expenditure is recognised at cost and transferred to the relevant asset category when the asset becomes available for use.

1.10.4. Impairment

Non‑current assets are reviewed annually for indicators of impairment. Where carrying amounts exceed recoverable amounts, impairment losses are recognised in accordance with IAS 36 (for intangible assets and PPE) as adopted by the FReM.

1.10.5. Leases

Recognition and measurement — as a lessee

The group recognises a right‑of‑use asset and corresponding lease liability for leases with a term greater than 12 months unless the underlying asset is low value. Right‑of‑use assets are depreciated over the term of the lease.

Lease liabilities are measured at the present value of lease payments, discounted using either the interest rate implicit in the lease or the HM Treasury incremental borrowing rate.

The lease liability is measured at the present value of the remaining lease payments. It is discounted using either the interest rate implicit in the lease or, where this cannot be readily determined, HM Treasury’s incremental borrowing rate, 4.81% for leases recognised to 31 December 2025, and 5.32% for leases recognised from 1 January 2026.

Expenditure recognised in the Consolidated Statement of Comprehensive Net Expenditure (CSoCNE) includes:

• interest on the lease liability
• straight‑line depreciation of the right‑of‑use asset over the lease term
• the effect of changes in variable lease payments not included in the initial measurement, recognised in the period in which the triggering event occurs

Recognition and measurement — as a lessor

Where HMRC acts as a lessor or intermediate lessor for an asset it has itself leased, the arrangement is assessed to determine whether substantially all risks and rewards of ownership transfer to the lessee.

Memorandum of Terms of Occupancy (MoTO) are not legally enforceable contracts and do not transfer risks and rewards to the occupier, therefore are treated as operating leases as defined under the former leases standard (IAS 17).

Revaluation of Leases

For IFRS 16, the cost model is applied as a proxy for fair value as the lease payments are updated to reflect current market pricing.

Peppercorn leases are measured at current value in existing use in accordance with the RCIS professional valuation standards. They are professionally valued annually.

Depreciation of leases

Asset Category	Lease life (term)
Leasehold land	Period of the lease
Leased service accommodation	Period of the lease
Leased IT assets	Period of the lease
Right‑of‑use assets	Period of the lease

Finance leases

Where risks and rewards do transfer, the sublease is treated as a finance lease. HMRC:

• derecognises the underlying right‑of‑use asset
• recognises a lease receivable representing the net investment in the lease
• recognises interest income over the lease term using the effective interest method

Where sublease rentals include irrecoverable VAT charged on the headlease, the VAT element is excluded from the lease receivable and is instead credited directly to the Consolidated Statement of Comprehensive Net Expenditure (CSoCNE).

Operating leases

Where substantially all risks and rewards do not transfer, the arrangement is treated as an operating lease and HMRC recognises rental income in the CSoCNE on a straight line basis over the lease term.

Long leasehold interests

Where the substance of a transaction transfers a long leasehold property interest to HMRC, the arrangement is not accounted for as a right‑of‑use asset under IFRS 16. Instead, HMRC recognises the asset as freehold property within Property, Plant and Equipment.

Information technology

Where applicable, non‑current IT assets recognised by HMRC’s IT service partners and used to provide services to the department are capitalised as leases and disclosed at the lower of fair value or the present value of minimum lease payments at the inception of the contract.

1.11. Pensions

1.11.1. Civil Service Pension Schemes

The Principal Civil Service Pension Scheme (PCSPS) and the Civil Servants and Others Pension Scheme (CSOPS), known as Alpha, are unfunded contributory defined benefit schemes. HMRC recognises the expected cost of these elements on an accruing basis by payments to PCSPS and CSOPS. Liability for future benefits is a charge on those schemes.

Further information can be found within the accounts of Civil Service Pensions.

1.11.2. Local Government Pension Scheme

Some VOA employees are members of the London Pensions Fund Authority (LPFA) a Local Government Pension Scheme (LGPS).

The HMRC Statement of Financial Position includes an asset representing the fair value of scheme assets attributable to the agency, less the present value of the defined benefit obligation. The asset recognised is limited by the IFRIC 14 asset ceiling.

Further information can be found within the Valuation Office Agency accounts.

1.11.3. Partnership pensions

The partnership pension account is a stakeholder pension arrangement. It is a defined contribution scheme available for members who do not wish to join a defined benefit arrangement.

1.12. Provisions and Contingent liabilities

The department discloses provisions and contingent liabilities above £0.1 million. Provisions are recognised in accordance with IAS 37 and measured using the best available information. Where material, provisions are discounted using rates set out in Public Expenditure System (2025) 09.

1.13. Value Added Tax (VAT)

Most of the department’s activities are outside the scope of VAT. Where activities attract VAT, output VAT is applied. The department also incurs recoverable and non‑recoverable input VAT on purchases. VAT is recovered on a limited number of services, under Section 41 of the VAT Act 1994 in line with the Contracting‑out Direction. Non‑recoverable VAT is charged to the relevant expenditure category or included in the capitalised cost of non‑current assets.

Otherwise, income and expenditure are shown net of VAT.

1.14. Insurance contracts (IFRS 17)

IFRS 17 Insurance Contracts replaces IFRS 4 and is effective from 1 April 2025, in line with the FReM. HM Treasury requires retrospective application where possible. HMRC has assessed the impact of adopting IFRS 17 and concluded that it does not have a material effect on these Resource Accounts.

1.15. Critical accounting judgements and key sources of estimation

The preparation of these financial statements in accordance with IFRS requires the use of accounting estimates and the application of judgement when interpreting HMRC’s accounting policies. Certain areas involve a higher degree of judgement, complexity or estimation uncertainty and have a significant effect on the Resource Accounts.

Personal tax credits expenditure

Personal tax credits, reported at note 3.1.1, include Child Tax Credit and Working Tax Credit. Receivable and payable balances are derived from tax credits systems and are used to apportion revenue from the Trust Statement — where disbursements are recorded on a cash basis — into these accounts on an accruals basis.

The accrual for personal tax credits is calculated using the actual split of Child Tax Credit and Working Tax Credit payments made during the year.

Corporation tax reliefs expenditure

The accounting policy for corporation tax reliefs involves judgement because there is no specific IFRS covering these transactions. HMRC recognises expenditure when companies incur qualifying expenditure to ensure consistency between the treatment in these accounts and the related corporation tax income recognised in the Trust Statement.

Expenditure is recognised in advance of claims being received because of the timing difference between when qualifying expenditure is incurred and when claims are submitted. This timing difference introduces estimation uncertainty. Assumptions are required regarding expected qualifying expenditure based on:

• historical claim patterns
• forecast growth rates
• expected changes in relevant tax policy and rates

Key assumptions underpinning the corporation tax reliefs estimate include:

• the proportion of company tax returns not yet received or processed at the point the data extract is taken (the uplift factor)
• the forecast growth rate applied to historic trends

Further detail on estimation uncertainty is provided at note 3.1.3.

Impairment of receivables

Receivables in the Statement of Financial Position are reported after impairment, which is estimated based on our analysis of existing receivables and historical trends in debt recovery, losses, discharges, amendments, and cancellations. In accordance with the FReM and IFRS 9, HMRC account for impairments for tax credits and benefits arising from statute and not a contract. However, to the extent applicable and feasible, impairment of receivables has been calculated in accordance with this standard.

The following receivables balances have been impaired: personal tax credits, Child Benefit, law costs, and other receivables (see note 10).

Impairment of personal tax credits receivables

HMRC uses an expected credit losses (ECL) model to estimate future recoverability of personal tax credits debt. The model draws on historic recovery rates and applies judgement in several areas, including:

• expected future recoverability based on recent years’ performance
• isolating HMRC’s underlying recovery efficiency from the effects of debt transferred to DWP
• assuming external economic conditions will not significantly affect recovery rates
• applying a discount rate of 2.45%, in line with Public Expenditure System guidance
• modelling 3 recovery scenarios (upper, base, lower), with assumed likelihoods of 25%, 70%, and 5% respectively

The scenarios are defined as follows:

• the upper scenario considers the average percentage point change (ppt) in the past 3 years debt recoverability rates, adds this change onto the last complete year’s debt recoverability rate, and applies that rate to future debt stocks
• the middle (base) scenario takes the last complete year’s debt recoverability rate and applies that to future debt stocks
• the lower scenario considers the average ppt change in the past 3 years debt recoverability rates, minuses half of this change from the last complete year’s debt recoverability rate, and applies that rate to future debt stocks

Provisions and contingent liabilities

HMRC undertakes a quarterly review of provisions and contingent liabilities. Estimates are prepared by the relevant business areas based on the likelihood of a liability arising and the best available information at the reporting date.

1.16. Impending application of newly issued accounting standards not yet effective

New and revised standards and interpretations have been issued but are not yet effective and have not therefore been adopted in this account.

IFRS 18 — Presentation and Disclosure of Financial Statements

IFRS 18 will replace IAS 1 Presentation of Financial Statements and is effective for annual reporting periods beginning on or after 1 January 2027 in the private sector. The standard has now been endorsed by the UK Endorsement Board (UKEB) but has not yet been considered by the Financial Reporting Advisory Board (FRAB).

IFRS 19 — Subsidiaries without Public Accountability: Disclosures

The objective of IFRS 19 is to specify the disclosure requirements an entity may apply instead of those in other IFRS Accounting Standards. The standard is also effective from 1 January 2027 in the private sector. IFRS 19 has not yet been endorsed by the UK Endorsement Board (UKEB) and has not yet been considered by the Financial Reporting Board (FRAB).

The impact of these standards on the public sector is still being assessed, and a decision has not yet been taken on an implementation date. HMRC will assess the implications of adopting these standards once endorsement has been completed.

2. Expenditure

	Note	2025-26 Department £m	2024-25 Department £m
Personal tax credits (note 1)	3.1.1	(93.4)	2,460.4
Corporation tax reliefs	3.1.3	10,764.1	10,123.3
Child Benefit
Child Benefit (note 2)		13,438.9	13,302.8
Guardian’s Allowance (funded from National Insurance Fund)		4.2	4.3
		13,443.1	13,307.1
Tax-Free Childcare		600.0	617.9
Lifetime ISA		693.7	624.4
Help to Save		41.1	45.0
Staff and related costs
Wages and salaries		2,821.4	2,520.8
Pension costs		779.7	721.7
Social security costs		380.2	283.7
Travel, subsistence and hospitality		46.2	44.7
Recruitment and training		36.1	26.9
Early severance schemes		2.9	(0.1)
Less capitalised costs		(62.0)	(62.5)
Service charges		4,004.5	3,535.2
Contract payments		154.1	137.1
Interest charges		14.4	12.7
Goods and services		168.5	149.8
IT services and consumables		1,192.3	1,015.9
Contracted out services		322.2	286.0
Legal and investigation		80.2	61.9
Printing, postage, stationery and office supplies		70.2	65.9
Enforcement costs		28.1	34.2
Telephone expenses		19.8	46.0
Research and Development		2.1	1.5
Consultancy		–	0.3
Other goods and services		27.1	23.4
		1,742.0	1,535.1
Payments in lieu of tax relief and rates		290.4	280.3
Other cash expenditure
Accommodation expenses		152.8	166.6
NIF collection service on behalf of other government departments		54.4	51.0
Operating leases		27.2	25.5
Losses and special payments (excluding Child Benefit and tax credits)		17.6	7.7
Auditors’ remuneration and expenses		–	–
Payments to add capacity		0.2	0.2
Other		32.6	30.2
Non-cash items:		284.8	281.2
Amortisation, depreciation and impairments
Amortisation	6	566.5	470.8
Depreciation	5, 7.1	143.3	142.3
Loss on impairment of non‑current assets		17.1	98.2
		726.9	711.3
Provisions for liabilities and charges (notes 1, 3)	13	118.7	321.5
Other non-cash
Transfer of personal tax credits receivables to DWP		46.9	412.0
Auditors’ fee (note 4)		2.3	2.3
Other		2.1	3.6
		51.3	417.9
Total non-cash items		896.9	1,450.7
Total expenditure		32,835.7	34,410.4

Notes:

1. Personal tax credits (PTC) expenditure reported in note 3.1.1 has reduced in 2025 to 2026 due to the closure of PTC. In 2025 to 2026 expenditure reduced by net provision utilisation and write back of £139.1 million (see note 13).
2. Child Benefit expenditure includes amounts paid to claimants or their partners with net adjusted incomes of more than £60,000 per annum in the 2025 to 2026 financial year, who were subject to the High Income Child Benefit Charge (HICBC). It is estimated that £388 million of HICBC liabilities relating to 2025 to 2026 will be paid in this and subsequent years. These income tax charges are accounted for in the Trust Statement. The latest equivalent estimate for 2024 to 2025 is £360 million.
3. Value differs from provisions reported in note 13 Provisions for liabilities and changes as it excludes the capital provision for dilapidations of £6.1 million.
4. The NAO did not undertake any work of a non‑audit nature during the period.

3. Tax credits, Child Benefit and Tax‑Free Childcare

3.1. Tax credits

Since the 2011 to 2012 financial year, personal tax credits (PTC) expenditure and certain corporation tax reliefs have been reported in these accounts. PTC closed on 5 April 2025, with remaining eligible customers moving to Universal Credit, administered by the Department for Work and Pensions.

Tax credits can comprise of both an element that is treated as negative taxation, being the extent to which the relief is less than or equal to the recipient’s tax liability, and an element that is more than the tax liability, being a payment of entitlement. Only those credits whose design allows the inclusion of a payment of entitlement are reported in these accounts.

3.1.1. Analysis of personal tax credits expenditure

PTC consists of Child Tax Credit and Working Tax Credit. The apportionment of expenditure between Child Tax Credit and Working Tax Credit shown in the table below is estimated.

Awards are assessed and paid throughout the financial year on a provisional basis, based on claimants’ assessments of their personal circumstances.

Claims are adjusted after the end of each award year, once claimants’ actual circumstances are known, this is called Finalisation. Finalisation may give rise to under or overpayments which are accounted for as soon as identified. Finalisation is not complete until after the Resource Account has been published, consequently there is uncertainty around the level of adjustments likely to arise.

Please refer to note 1.5.1 for details concerning the closure of PTC.

Analysis of personal tax credits expenditure

	2025-26 Child Tax Credit £m	2025-26 Working Tax Credit £m	2025-26 Total tax credits £m	2024-25 Child Tax Credit £m	2024-25 Working Tax Credit £m	2024-25 Total tax credits £m
Tax credits	(107.6)	(28.6)	(136.2)	1,577.4	415.4	1,992.8
Movement in impairment of receivables	(142.3)	(37.5)	(179.8)	250.4	66.0	316.4
Remissions/write‑offs	93.7	62.1	155.8	240.5	120.0	360.5
Total personal tax credits	(156.2)	(4.0)	(160.2)	2,068.3	601.4	2,669.7
Personal tax credits expenditure comprises:
Cash			(93.4)			2,460.4
Non‑cash (provisions)			(66.8)			209.3
			(160.2)			2,669.7

Further information on the operation of personal tax credits can be found on GOV.UK.

3.1.2. Personal tax credits receivables

Where under or overpayments are identified, either during the award year or subsequently, adjustments are made to expenditure. Overpayments are treated as receivables, and the department seeks to recover these through direct repayment.

The Department for Work and Pensions (DWP) has responsibility for recovering PTC debt for customers who have made a claim to Universal Credit (UC). DWP is also responsible for taking on the debt of customers who have fallen out of the tax credits regime and for whom a direct earnings attachment can be used to recover the debt. HMRC started to transfer this debt in 2019 to 2020. In line with the FReM, debt transfers are treated as capital grants in kind in the Financial Statements. The debt stock is impaired consistently with IFRS 9 (Financial Instruments) and in line with HMRC policy.

Personal tax credits receivables

	Note	2025-26 Department £m	2024-25 Department £m
Receivables as at 1 April		1,335.7	2,290.0
Adjustment to prior year finalisation estimate		1.0	(41.1)
Estimated overpayment of awards prior to finalisation		–	0.4
Overpayments identified from change of circumstances in year		11.5	342.2
Transferred to DWP (note)		(132.0)	(609.7)
Recoveries made		(135.5)	(285.6)
Remissions/write‑offs		(155.8)	(360.5)
Receivables as at 31 March		924.9	1,335.7
Impairment as at 1 April		861.3	742.6
– Transferred to DWP (note)		(85.1)	(197.7)
– Movement in impairment		(179.8)	316.4
Impairment at 31 March		596.4	861.3
Net receivables at 31 March		328.5	474.4
Of which:
Amounts expected to be recovered within one year	10	127.4	183.9
Amounts expected to be recovered in more than one year	10	201.1	290.4
Total		328.5	474.3
Gross receivables		132.0	609.7
Impairments		(85.1)	(197.7)
Net receivables transferred to DWP		46.9	412.0

Note: Summary of receivables transferred to DWP.

Personal tax credits expected credit loss (ECL)

HMRC routinely assess likely recovery of debts, accepting that the individual credit risk associated with these debts increases as they age. However, the credit risk itself is not routinely assessed because the debts relate to overpayments made to benefit claimants, and not to lending through formal arrangements.

As simple financial instruments, under IFRS 9 the debts are impaired over their lifetime as required under the FReM (chapter 8.2, table 2, interpretation 6).

The credit loss we recognise is the difference between the cash flows that are due to HMRC, in accordance with our contractual relationship with our customers, and the cash flows that we expect to receive. The main data inputs to the model are historic annual stocks and recoveries of debt. The key assumptions/judgements included in the ECL model are included in note 1.15.

HMRC have explored possible correlations between the Average Earnings Index and Consumer Price Index and direct recovery of PTC debt. After testing, no robust relationships were found between these economic determinants and debt recovery, therefore forecasts of future economic conditions are not included in our ECL model. We therefore consider historic recovery experience to be a suitable proxy for future debt recovery.

The impairment rate for 2025 to 2026 is 64%, which remains in line 2024 to 2025 (64%). From 2024 to 2025 HMRC could no longer recover debt from ongoing live awards.

The table below provides a summary of the impairment information:

	Gross receivable £m	Impairment £m	Net receivable £m
Total HMRC debt	924.9	596.4	328.5
of which debt more than one but less than 5 years old	209.5	136.7	72.8
of which debt more than 5 but less than 10 years old	261.4	166.6	94.8
of which debt more than 10 years old	454.0	293.1	160.9

Sensitivity analysis

There is a significant degree of uncertainty around the assumptions that underpin the ECL model. The sensitivity analysis below provides an indication of the impact on the impairment estimate if key assumptions were to change.

Scenario	Change to impairment as a percentage of gross receivables	Change to impairment £m
The upper recovery scenario was applied to 100% of the debt stock (as opposed to 25%).	‑2ppt	(‑23)
The lower recovery scenario was applied to 100% of the debt stock (as opposed to 5%).	2ppt	21

Personal tax credits error and fraud

Due to the closure of PTC on 5 April 2025, most customers have transferred over to Universal Credit administered by the DWP. Therefore, the estimated level of error and fraud is immaterial to the level that an updated estimate for 2025 to 2026 is not required. For comparative purposes we include figures from the 2024 to 2025 Resource Accounts below.

For 2024 to 2025, the central estimate for overpayments to claimants was 4.2% (£85 million) with a lower range of 4% (£80 million) and a higher range of 4.5% (£90 million). The central estimate for underpayments to claimants was 0.8% (£15 million) with a lower range of 0.6% (£13 million) and a higher range of 0.9% (£17 million).

3.1.3. Corporation tax reliefs

Corporation tax reliefs allow businesses to reduce their taxes where they invest in activities such as research and development or creative sectors. This note explains how much these reliefs cost, how estimates are produced, and how error and fraud are measured. Reliefs may include a payable element, meaning the value of relief can exceed the company’s tax liability. Other corporation tax reliefs are disclosed in the Trust Statement.

Corporation tax reliefs

The table below shows the estimated value of reliefs claimed in 2025 to 2026 and 2024 to 2025 across key schemes.

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.

		2025-26 Department  Current year £m	2025-26 Department Stability adjustment (note 1) £m	2025-26 Department Total £m	2024-25 Department  2024-25 £m	2024-25 Department  Stability adjustment (note 1) £m	2024-25 Department  Total £m
Research and development (note 2)	Merged R&D expenditure credit (Merged RDEC)	7,751.6	–	7,751.6	1,209.4	–	1,209.4
	Enhanced R&D intensive support (ERIS)	1,182.5	–	1,182.5	1,134.7	–	1,134.7
	Research and development expenditure credits (RDEC)	–	(396.8)	(396.8)	4,075.1	(275.6)	3,799.5
	Small and Medium‑sized Enterprises (SME)	–	(520.9)	(520.9)	1,736.2	(230.1)	1,506.1
Creative industries (note 3)	Audio‑Visual and Video Games Expenditure Credits3	1,826.2	–	1,826.2	626.1	–	626.1
	Theatre Tax Relief	307.0	18.0	325.0	234.4	(0.9)	233.5
	Video Games Tax Relief	166.5	53.2	219.7	215.0	28.2	243.2
	Film Tax Relief	103.6	79.4	183.0	252.7	38.1	290.8
	Orchestra Tax Relief	51.1	(8.1)	43.0	44.8	(0.5)	44.3
	Museums and Galleries Exhibition Tax Relief	31.8	(0.5)	31.3	37.8	0.5	38.3
	Animation Tax Relief	3.8	5.2	9.0	14.3	2.7	17.0
	Children’s Television Tax Relief	2.7	3.0	5.7	14.8	(8.1)	6.7
	High‑end Television Tax Relief	151.5	(152.3)	(0.8)	650.4	167.4	817.8
	Independent Film Tax Relief3	–	–	–	95.2	–	95.2
Land Remediation Relief		95.9	9.5	105.4	63.4	(2.9)	60.5
Enhanced Capital Allowance		–	0.2	0.2	–	0.2	0.2
Total		11,674.2	(910.1)	10,764.1	10,404.3	(281.0)	10,123.3

Notes:

1. This represents the extent to which the final estimate; a reasonable proxy for final outturn; differs from the initial estimate recorded 5 years previous.
2. Presentation of these schemes represent the closure of the old Research and development expenditure credit (RDEC) and Small and Medium‑sized Enterprises (SME) schemes following the implementation of the Merged Research and development expenditure credit (Merged RDEC) and Enhanced R&D intensive support (ERIS) for Corporation Tax accounting periods beginning on or after 1 April 2024.
3. Comparative values have been revised to present consistently with this new structure.
4. Presentation of Independent Film Tax Relief from 2025 to 2026 is reflective of such claims being made under Audio‑Visual Expenditure Credits.

Research and development tax relief

Changes between 2024 to 2025 and 2025 to 2026

The overall cost of R&D tax reliefs has increased, although this reflects different trends within the constituent reliefs. For R&D, 2025 to 2026 represents the first full year of the new Enhanced R&D intensive support (ERIS) and merged RDEC R&D schemes, as well as the withdrawal of the previous SME and RDEC schemes.

Estimated costs for 2025 to 2026 fully reflect the following rates:

• merged RDEC rate of 20%
• ERIS additional deduction of 86%
• ERIS credit rate of 14.5%

Uplift and growth assumptions

The estimate of R&D tax relief for 2025 to 2026 is based on claims for the 2024 to 2025 financial year received up to 31 January 2026, with uplift factors applied to account for claims not yet submitted. Forecast growth in RDEC and SME expenditure is based on economic determinants published by the Office for Budget Responsibility, adjusted for the expected impact of the Additional Information Form introduced in 2023 to reduce levels of error and fraud. These assumptions reflect the latest available evidence on filing patterns and the effect of recent compliance and policy changes.

Sensitivity analysis

Because these estimates rely on assumptions about growth and claim patterns, we test how changes in these assumptions could affect expenditure. The results show that a 5–8% change in key assumptions could shift estimated costs by £121 million to £307 million in either direction. The range estimates set out in the table below are based on judgments of the levels of uncertainty, and it is possible actual values may exceed them.

Assumption tested	Typical range of change	Variation — increase £m	Variation — decrease £m
R&D SME uplift (2024 to 2025) (note 1)	±7%	126	(126)
RDEC uplift (2024 to 2025) (note 1)	±8%	307	(307)
R&D SME expenditure growth and additional information form impact (2025 to 2026) (note 2)	±5%	121	(121)
Merged RDEC expenditure growth (2025 to 2026) (note 2)	±5%	304	(304)

Notes:

1. For the R&D SME and RDEC uplift factors, the change to the key assumption is based on maximum variations seen in recent years, based on a 31 January cut‑off date for data.
2. For the R&D SME RDEC expenditure growth, the increase and decrease uses a flat rate of + 5.0%/‑5.0% consistent with sensitivity analysis completed in previous years. The SME expenditure growth test incorporates the impact of the additional information form and includes companies on the ERIS scheme along with non‑intensive SMEs who have transitioned onto the Merged RDEC SME scheme. The Merged RDEC expenditure growth test includes companies that are transitioning from the old RDEC scheme.

These values show potential uncertainty and do not represent forecasts.

Creative Industries Reliefs

Changes between 2024 to 2025 and 2025 to 2026

The overall cost of Creative Industries relief has increased in 2025 to 2026, although this reflects different trends within the constituent reliefs.

Creatives reliefs now include the introduction of visual effects (VFX) enhancement to Audio-Visual Expenditure Credit (AVEC) in 2025 to 2026 and the first full year of implementation for Independent Film Tax Credits.

New Expenditure Credits

From 2025, Audio‑Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC) began replacing some older schemes. Claims for these new credits are expected to rise sharply in 2025 to 2026 as businesses move from the older reliefs, so legacy scheme claims will fall.

Creative industries reliefs — uplift and growth assumptions

Estimates for creative industries reliefs are based on industry data, expected economic growth and agreed assumptions about how new expenditure credit schemes will replace older reliefs.

The estimates use data on claims received up to early 2026:

• for Film Tax Relief, including independent film, and High‑end Television Tax Relief, growth is forecast using trends derived from British Film Institute industry data
• Video Games Tax Relief, Animation Tax Relief and Children’s Television Tax Relief are forecast to grow in line with the Office for Budget Responsibility’s nominal GDP assumptions
• for Theatre Tax Relief, Orchestra Tax Relief and Museum and Galleries Exhibition Tax Relief, expenditure is forecast using uplifted outturn which is then grown annually in line with nominal GDP and adjusted for the increased rates introduced from October 2021
• AVEC and VGEC replace the older creative industry reliefs for Film, High‑end Television, Animation and Children’s Television; Forecasts for these new credits reflect expected transition from legacy schemes, based on uptake assumptions agreed with the Office for Budget Responsibility when the expenditure credit regimes were introduced

Growth in 2025-26	Best case growth %	Value impact (£m)	Worst case growth %	Value impact (£m)
HETV	4.7%	9.4	2.8%	‑9.4

Uptake rates	Best case uptake %	Value impact (£m)	Worst case uptake %	Value impact (£m)
AVEC	100% (FILM, HETV, ANI, CTV) (note 1)	10	78% (FILM), 80% (ANI), 74% (HETV), 82% (CTV) (note 2)	‑7
VGEC	75% (note 3)	0.1	22%	‑1.1

Notes:

1. Assume that uptake reaches 100% for all reliefs next year ahead of schedule.
2. Assume that uptake remains static and does not increase at all in the next year.
3. Assume that uptake doubles the expected amount (to 75% rather than 50%).

3.1.4. Corporation tax reliefs — R&D error and fraud

HMRC estimated error and fraud in LB RDEC claims using a new method of estimation for the first time this year. The previous assumption‑based method used administrative data allied to the Corporation Tax LB tax gap estimate to calculate error and fraud. The new desk review exercise was carried out by experienced LB R&D caseworkers into stratified random samples of LB RDEC claims. This new method has improved the statistical reliability of the LB error and fraud estimates through individually assessing whether the original risk selection for resource‑led compliance activity appropriately identified non‑compliance.

The resulting estimates represent HMRC’s best assessment of the level of error and fraud within R&D reliefs for the year. The estimates involve uncertainty due to the timing of claims, enquiries in progress, and the transition in compliance requirements.

Estimated value of R&D error and fraud and as a percentage of the estimated R&D tax relief expenditure

	Estimate of the rate of error and fraud	2023-24 Implied monetary value of error and fraud £m
SME scheme (note 1)	11.1%	347
RDEC (including SME and Large Business claims)	3.2%	146
Total R&D tax relief expenditure (note 2)	6.4%	493

Notes:

1. Figures for 2023 to 2024 have been revised to reflect updated results from HMRC’s Random Enquiry Programme and improved estimation methods.
2. The total estimate represents HMRC’s best current assessment of R&D error and fraud, based on the most recent compliance and analytical evidence available.

For the SME estimate, we estimated ranges which illustrate a 95% confidence interval for the error and fraud estimate. The rate of error and fraud in the SME scheme for 2023 to 2024 is not statistically different from the rate for 2022 to 2023 and reflects natural variability in the results based on a sample of cases.

R&D error and fraud — uncertainty ranges

HMRC estimates that a proportion of R&D tax relief may be claimed incorrectly, but the exact amount is uncertain.

HMRC estimates, with reasonable statistical confidence for both SME and RDEC claims, the range of error and fraud as follows.

These ranges illustrate the potential variability in the estimate. Actual values may fall outside the bounds shown. Applying these ranges to the estimated R&D corporation tax relief expenditure for 2023 to 2024 gives the following results:

	Lower bound £m	Lower bound %	Most likely £m	Upper bound %	Upper bound £m	Upper bound %
SME scheme	231	7.4	347	11.1	484	15.5
RDEC scheme	66	1.4	146	3.2	376	8.2
Combined	297	3.8	493	6.4	860	11.1

Revisions to the expenditure base

The error and fraud estimates for 2023 to 2024 are affected by revisions to the underlying expenditure base for R&D corporation tax reliefs. As set out in note 3.1.4, estimates of reliefs expenditure are updated over a five‑year period as more complete claims data becomes available. The latest estimate for 2023 to 2024 reduces the expenditure base, reflecting overestimation in earlier years.

The updated expenditure base and the final adjustment applied for 2018 to 2019 are shown below:

	2023-24 expenditure initially estimated £m	Final adjustment relating to 2018-19 £m	Total expenditure reported in 2023-24 Annual Report and Accounts £m	Updated estimate for 2023-24 £m
R&D SME	3,256.9	1,290.7	4,547.6	2,335.7
RDEC	4,447.2	446.1	4,893.3	4,605.9
Total	7,704.1	1,736.8	9,440.9	6,941.6

Illustrative future estimates for error and fraud

To indicate the potential impact of recent legislative changes and operational measures, we have prepared illustrative estimates of R&D error and fraud for 2024 to 2025 and 2025 to 2026. These changes include revised rates of relief, the extension of qualifying expenditure to data and cloud computing, and the mandation of digital claims requiring additional information.

The table below compares previously published illustrative estimates with the latest estimates based on Random Enquiry Programme results, including the updated figures for 2023 to 2024:

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.

		Previously published illustrative estimates 2023–24 £m	Previously published illustrative estimates 2024–25 £m	Previously published illustrative estimates 2022-23 (final estimate) £m	Latest estimates based on random enquiry programmes 2024–25 (illustrative) £m	Latest estimates based on random enquiry programmes 2025–26 (illustrative) £m
Value of error fraud (£million)	SME scheme/ERIS	370	339	347	253	131
	RDEC/merged RDEC (SME) (note)	127	142	146	127	278
	RDEC/merged RDEC (LB) (note)				62	66
	Total	497	481	493	442	475
Rate of error and fraud (%)	SME scheme/ERIS	11.7	10.6	11.1	11.0	11.0
	RDEC/merged RDEC (SME) (note)	2.9	2.9	3.2	11.0	11.0
	RDEC/merged RDEC (LB) (note)	2.9	2.9	3.2	11.0	11.0
	Total	6.5	5.9	6.4	5.3	5.3

The reduction in rates between 2024 to 2025 and 2025 to 2026 reflects the introduction of the Additional Information Form for R&D related claims and the introduction of the new ERIS and merged RDEC schemes. These were introduced by HMRC as part of the strategy to strengthen compliance and reduce error and fraud. These figures are illustrative only; formal estimates for future years will be produced once sufficient compliance data is available.

3.2. Child Benefit

Error and Fraud in Child Benefit is measured by selecting a random sample of 2,700 claimants each year who are asked to provide evidence that they are eligible for Child Benefit.

The 2025 to 2026 cycle runs over a 12‑month period with a random sample of 225 claimants pulled from the population each month between December 2024 and November 2025.

In 2025 to 2026, the majority of claimants (89%) responded to these compliance requests.

Of those, almost all (98%) provided the necessary evidence to prove their eligibility, while a small proportion of those who responded (2%) informed HMRC that they are ineligible for Child Benefit (and so their claim is in error and fraud).

11% of those contacted failed to respond to the compliance request. To determine whether these claimants should be considered compliant or non‑compliant they were put through a Desk‑Based Analysis (DBA) model, which uses other information HMRC holds on these claimants.

The 2025 to 2026 DBA concluded that 16% of non‑responders were likely to be non‑compliant and 84% were likely to be compliant.

Estimated value of Child Benefit error and fraud and as a percentage of estimated Child Benefit expenditure

	2025-26 Lower bound £m	2025-26 Central estimate £m	2025-26 Upper bound £m	2024-25 Lower bound £m	2024-25 Central estimate £m	2024-25 Upper bound £m
Child Benefit error and fraud	200 (1.5%)	270 (2.0%)	335 (2.5%)	200 (1.5%)	270 (2.0%)	330 (2.5%)

This year’s central estimate of E&F (2%) has remained steady compared to 2024 to 2025 (2%).

3.3. Tax-Free Childcare

A Tax‑Free Childcare Error and Fraud (TFC E&F) estimate is included in this year’s report to reflect increased availability of robust modelling data since the inception of the scheme in April 2017 when only limited samples were available.

E&F in Tax‑Free Childcare can arise either through the customer having been found to not meet one or more of the eligibility criteria at the point of reconfirmation, occurring every 3 months, or through using top up to pay a childcare provider for something other than qualifying childcare.

HMRC developed and implemented an ongoing annual Error and Fraud Analytical Programme (EFAP) for Tax‑Free Childcare, starting in 2021. The exercise uses a stratified random sample to select 1,440 households (120 per month) across a calendar year for a full compliance investigation, and results are weighted to the Tax‑Free Childcare population level to give our best estimate of E&F in Tax‑Free Childcare for the year. The calendar year estimate is then used as a proxy for the reporting year (such as using the 2025 E&F estimate for tax year 2025 to 2026). This allows time for operational and analytical work to conclude for publication in the Resource Accounts.

Estimated value of Tax-Free Childcare error and fraud and as a percentage of estimated Tax-Free Childcare expenditure, tax years 2025 to 2026 and 2024 to 2025

	2025-26 Lower bound £m	2025-26 Central estimate £m	2025-26 Upper bound £m	2024-25 Lower bound £m	2024-25 Central estimate £m	2024-25 Upper bound £m
Tax‑Free Childcare error and fraud	10 (1.6%)	17 (2.8%)	24 (4.0%)	4 (0.7%)	9 (1.4%)	14 (2.2%)

The central estimate of Tax‑Free Childcare E&F in 2025 to 2026 was 2.8% of government top up, with a 95% confidence interval of 1.6% to 4.0%. This is equivalent to £17 million and is an increase of 1.4 percentage points from the 2024 to 2025 central estimate, although the change is not statistically significant.

Based on results to date, the sample size of 1,440 gives an accuracy of +/‑0.5%. For example, if the true E&F rate was 2%, the central estimate from EFAP could be anywhere between 1.5% and 2.5%.

4. Income

Operating income relates to the operating activities of the department. This principally comprises revenue from fees and charges for services provided to other government departments, agencies, non‑departmental bodies, and external customers on a full cost recovery basis. This is in accordance with HM Treasury guidance in Managing Public Money.

Income is stated net of VAT and is recognised in accordance with IFRS 15: Revenue from Contracts with Customers. This includes HMRC’s statutory powers in line with the FReM adaptation of IFRS 15.

Income includes both budgetary and non‑budgetary income. Non‑budgetary income is outside of the ambit of the department and is surrendered to the Consolidated Fund.

Operating income

	2025-26 Department £m	2024-25 Department £m
Revenue from Contracts with Customers
Valuation Office Agency Services (note 1)	52.3	51.1
National Minimum Wage enforcement	33.6	31.3
Anti Money Laundering Service	23.3	22.7
UKBA Service Charges	20.5	20.5
Spirit Drinks Fees and Certificates	0.5	1.6
	130.2	127.2
Other Income
Memorandum of Terms of Occupation Income (note 2)	53.7	42.8
IT and telephony charges	33.5	50.1
Banking Services	24.0	20.4
Administration services	17.9	44.2
Subscriptions and fees	17.8	24.6
Proceeds of Crime Act	14.8	10.8
IFRS 16 Rental Income from sub‑lessees	14.0	13.2
Other Income types	73.2	61.6
Total	248.9	267.7

Notes:

1. Valuation Office Agency Services relate to income generated by the provision of valuations and property advice to support taxation and benefits and is stated net of VAT.
2. Memorandum of Terms of Occupation Income represents the agreement with other Crown bodies allowing the sharing of costs for occupying a building, or part of a building. The income and full cost included is where HMRC is the major occupier of the building and has recharged the costs to other Crown bodies who also occupy the building.

5. Property, plant and equipment

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.

	Land £m (note 1)	Buildings £m (note 1)	Accommodation refurbishments £m (note 1)	Office and computer equipment £m	Vehicles and scientific aids £m	Furniture and fittings £m	Assets under construction £m	2025-26 Total £m
Cost or valuation
At 31 March 2025	43.7	169.7	417.3	364.1	16.7	68.1	33.1	1,112.7
Balance at 1 April 2025	43.7	169.7	417.3	364.1	16.7	68.1	33.1	1,112.7
Additions	–	–	–	23.9	1.1	0.1	71.6	96.7
Donations	–	–	–	–	–	–	–	–
Disposals	–	(5.1)	(2.4)	(45.7)	(1.5)	(0.1)	–	(54.8)
Impairments	–	(0.6)	–	–	–	–	(1.7)	(2.3)
Reclassifications	–	0.7	10.3	(0.5)	–	0.3	(15.9)	(5.1)
Revaluations (note 2)	4.4	0.8	–	–	–	–	–	5.2
At 31 March 2026	48.1	165.5	425.2	341.8	16.3	68.4	87.1	1,152.4
Depreciation
At 31 March 2025	(0.3)	(66.3)	(88.7)	(253.4)	(10.7)	(24.3)	–	(443.7)
Balance at 1 April 2025	(0.3)	(66.3)	(88.7)	(253.4)	(10.7)	(24.3)	–	(443.7)
Charged in year	0.2	(5.3)	(22.6)	(37.3)	(1.5)	(5.7)	–	(72.2)
Disposals	–	5.1	1.8	40.3	1.2	–	–	48.4
Impairments	–	–	–	–	–	–	–	–
Reclassifications	–	–	(0.4)	0.4	–	–	–	–
Revaluations (note 2)	0.3	4.0	–	–	–	–	–	4.3
At 31 March 2026	0.2	(62.5)	(109.9)	(250.0)	(11.0)	(30.0)	–	(463.2)
Carrying amount at 31 March 2025	43.4	103.4	328.6	110.7	6.0	43.8	33.1	669.0
Carrying amount at 31 March 2026	48.3	103.0	315.3	91.8	5.3	38.4	87.1	689.2
Of the total:
Core department	48.3	103.0	312.9	91.8	5.3	38.0	86.9	686.2
Valuation Office Agency	–	–	2.4	–	–	0.4	0.2	3.0
Carrying amount at 31 March 2026	48.3	103.0	315.3	91.8	5.3	38.4	87.1	689.2
The assets are financed as follows:
Owned	48.3	97.8	315.3	81.7	5.3	38.4	87.1	673.9
PFI contracts	–	5.2	–	10.1	–	–	–	15.3
Carrying amount at 31 March 2026	48.3	103.0	315.3	91.8	5.3	38.4	87.1	689.2

Notes:

1. See note 1.10.1 for the accounting policy for property assets.
2. See note 1.10.1 for the accounting policy regarding revaluation of property, plant and equipment.

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.

	Land £m (note 1)	Buildings £m (note 1)	Accommodation refurbishments £m (note 1)	Office and computer equipment £m	Vehicles and scientific aids £m	Furniture and fittings £m	Assets under construction £m	2024-25 Total £m
Cost or valuation
At 1 April 2024	55.4	287.2	426.1	332.3	16.7	67.2	27.1	1,212.0
Additions	–	–	–	35.1	1.5	1.1	27.4	65.1
Donations	–	–	–	–	–	–	–	–
Disposals	–	(3.4)	(0.5)	(10.4)	(1.9)	(0.7)	–	(16.9)
Impairments	(11.7)	(0.8)	(18.0)	–	–	(0.1)	–	(30.6)
Reclassifications	–	0.1	9.7	7.1	0.4	0.6	(21.4)	(3.5)
Revaluations (note 2)	–	(113.4)	–	–	–	–	–	(113.4)
At 31 March 2025	43.7	169.7	417.3	364.1	16.7	68.1	33.1	1,112.7
Depreciation
At 1 April 2024	(0.1)	(176.9)	(67.3)	(220.5)	(10.7)	(19.2)	–	(494.7)
Charged in year	(0.2)	(6.3)	(21.9)	(42.9)	(1.5)	(5.8)	–	(78.6)
Disposals	–	13.3	0.5	10.0	1.5	0.7	–	26.0
Impairments	–	–	–	–	–	–	–	–
Reclassifications	–	–	–	–	–	–	–	–
Revaluations (note 2)	–	103.6	–	–	–	–	–	103.6
At 31 March 2025	(0.3)	(66.3)	(88.7)	(253.4)	(10.7)	(24.3)	–	(443.7)
Carrying amount at 31 March 2024	55.3	110.3	358.8	111.8	6.0	48.0	27.1	717.3
Carrying amount at 31 March 2025	43.4	103.4	328.6	110.7	6.0	43.8	33.1	669.0
Of the total:
Core department	43.4	103.4	325.5	110.7	6.0	43.7	32.7	665.4
Valuation Office Agency	–	–	3.1	–	–	0.1	0.4	3.6
Carrying amount at 31 March 2025	43.4	103.4	328.6	110.7	6.0	43.8	33.1	669.0
The assets are financed as follows:
Owned	43.4	95.2	328.6	108.6	6.0	43.8	33.1	658.7
PFI contracts	–	8.2	–	2.1	–	–	–	10.3
Carrying amount at 31 March 2025	43.4	103.4	328.6	110.7	6.0	43.8	33.1	669.0

Notes:

1. See note 1.10.1 for the accounting policy for property assets.
2. See note 1.10.1 for the accounting policy regarding revaluation of property, plant and equipment.

Property revaluation

Valuations were performed by the Valuation Office Agency, an executive agency of HM Revenue and Customs, whose services include providing valuation and estate surveying services to government departments.

6. Intangible assets

	Licence £m	Software and website development £m	Assets under construction £m	2025-26 Total £m
Cost or valuation
At 1 April 2025	115.9	5,762.6	1,008.4	6,886.9
Additions	112.9	–	575.3	688.2
Disposals	(27.6)	(184.2)	–	(211.8)
Impairments	–	–	(17.7)	(17.7)
Reclassification and transfers	7.5	985.2	(987.6)	5.1
Revaluation	–	(0.3)	–	(0.3)
At 31 March 2026	208.7	6,563.3	578.4	7,350.4
Amortisation
At 1 April 2025	(62.6)	(3,859.9)	–	(3,922.5)
Charged in year	(56.4)	(510.1)	–	(566.5)
Disposals	27.5	182.9	–	210.4
Impairments	–	–	2.8	2.8
Reclassification and transfers	–	2.8	(2.8)	–
Revaluation	–	(1.8)	–	(1.8)
At 31 March 2026	(91.5)	(4,186.1)	–	(4,277.6)
Carrying amount at 31 March 2025	53.3	1,902.7	1,008.4	2,964.4
Carrying amount at 31 March 2026	117.2	2,377.2	578.4	3,072.8
The assets are financed as follows:
Owned	117.2	2,377.2	578.4	3,072.8
Carrying amount at 31 March 2026	117.2	2,377.2	578.4	3,072.8
Of the total:
Core department	117.2	2,303.3	502.8	2,923.3
Valuation Office Agency	–	73.9	75.6	149.5
Carrying amount at 31 March 2026	117.2	2,377.2	578.4	3,072.8

	Licence £m	Software and website development £m	Assets under construction £m	2024-25 Total £m
Cost or valuation
At 1 April 2024	106.6	5,482.7	988.0	6,577.3
Additions	18.2	–	631.5	649.7
Disposals	(20.0)	(255.8)	(0.2)	(276.0)
Impairments	–	–	(67.6)	(67.6)
Reclassification and transfers	11.1	535.7	(543.3)	3.5
Revaluation	–	–	–	–
At 31 March 2025	115.9	5,762.6	1,008.4	6,886.9
Amortisation
At 1 April 2024	(46.7)	(3,671.2)	–	(3,717.9)
Charged in year	(34.9)	(435.9)	–	(470.8)
Disposals	19.0	247.2	–	266.2
Impairments	–	–	–	–
Reclassification and transfers	–	–	–	–
Revaluation	–	–	–	–
At 31 March 2025	(62.6)	(3,859.9)	–	(3,922.5)
Carrying amount at 31 March 2024	59.9	1,811.5	988.0	2,859.4
Carrying amount at 31 March 2025	53.3	1,902.7	1,008.4	2,964.4
The assets are financed as follows:
Owned	53.3	1,902.7	1,008.4	2,964.4
Carrying amount at 31 March 2025	53.3	1,902.7	1,008.4	2,964.4
Of the total:
Core department	53.3	1,827.3	961.1	2,841.7
Valuation Office Agency	–	75.4	47.3	122.7
Carrying amount at 31 March 2025	53.3	1,902.7	1,008.4	2,964.4

Intangible assets includes material assets for Customs Declaration Service (CDS) which relate to declarations for all goods, including excise goods and those that move through all routes including maritime ports, and also those for Making Tax Digital (MTD).

	2025-26 £m	2025-26 Remaining life 31 March 2026	2025-26 Assets under construction	2024-25 Software assets	2024-25 Assets under construction
Customs Declaration Service (CDS)	675.1	9 years 6 months	15.8	688.8	77.8
Making Tax Digital (MTD)	372.2	9 years	6.4	–	364.7

Software revaluation

In agreement with HM Treasury, HMRC early adopted a change set out in 2025 to 2026 FReM from 2024 to 2025. Therefore, no revaluation has been applied to intangible assets from 1 April 2024 onwards.

7. Right‑of‑use leases

HMRC’s right‑of‑use lease contracts comprise leases of operational land and buildings and motor vehicles. The table presents disclosures of right‑of‑use assets recognised under IFRS 16.

Further information regarding lease accounting can be found in note 1.10.5.

The balances predominently relate to office space in leasehold property; the carrying value for vehicles is less than £3.5 million of the total.

7.1. Right-of-use leased assets

		2025-26 Buildings and vehicles £m	2024-25 Buildings and vehicles £m
Cost:	At 1 April	1,122.6	1,112.5
	Remeasurement of existing leases	118.9	26.9
	Additions — new leases	2.6	9.3
	Disposals	(3.6)	(26.1)
	Reclassifications	–	–
	Revaluations	0.2	–
	At 31 March	1,240.7	1,122.6
Depreciation:	At 1 April	(173.8)	(123.0)
	Charged in‑year	(71.1)	(63.7)
	Disposals	3.1	12.9
	Reclassifications	–	–
	At 31 March	(241.8)	(173.8)
	Carrying amount at 31 March	998.9	948.8

7.2. Lease liabilities

A maturity analysis of contractual discounted cash flows relating to lease liabilities is given below. The cash flows and balances are presented net of irrecoverable VAT.

The right‑of‑use asset is initially measured on an amount equal to the lease liability, adjusted for certain additional items such as prepayments or lease incentives and then depreciated over the lease term. The liability itself is repaid at a different rate to straight line depreciation of the asset. Therefore, at any given time,the lease liability shown here and asset values above will not present as equal and opposite. However, at the end of the life of the lease, both liability and asset will reduce to nil.

Maturity analysis

	2025-26 £m	2024-25 £m
Buildings
Not later than one year	76.1	58.8
Later than one year and not later than 5 years	328.6	304.5
Later than 5 years	939.2	944.5
	1,343.9	1,307.8
Less interest element	(118.7)	(120.8)
Present Value of obligations	1,225.2	1,187.0
Vehicles
Not later than one year	1.3	0.8
Later than one year and not later than 5 years	2.7	1.9
Later than 5 years	–	–
	4.0	2.7
Less interest element	(0.3)	–
Present Value of obligations	3.7	2.7
Total Present Value of obligations	1,228.9	1,189.7
Current portion	64.7	59.4
Non‑current portion	1,164.2	1,130.3

7.2. Amounts recognised in Statement of Comprehensive Net Expenditure

	2025-26 £m	2024-25 £m
Interest paid to lessor	13.0	11.7
Depreciation	71.1	63.7
Variable lease payments not included in lease liabilities	–	–
Non‑recoverable VAT	16.0	14.7
Expenses related to short‑term leases	–	–
Expenses related to low value asset leases (excluding short‑term leases)	0.2	0.1
Rental income from sub‑leasing	(14.0)	(13.2)
Other	–	(0.4)
Total charged to the Statement of Comprehensive Net Expenditure under IFRS 16	86.3	76.6

Total charged to the Statement of Comprehensive Net Expenditure resulting from IFRS 16 above is materially the same as would have been charged under IAS 17.

7.4. Amounts recognised as cash outflow for leases

	2025-26 £m	2024-25 £m
Total cash outflow for leases	91.7	83.5

8. Commitments under PFI and other service concession arrangements

8.1. Off-Statement of Financial Position

The department has no off‑Statement of Financial Position PFI contracts.

8.2. On-Statement of Financial Position

The following commitments are in respect of assets that have been brought onto the department’s Statement of Financial Position under IAS 17 and IFRIC 12 Service Concession Arrangements. These comprise of commitments relating to Newcastle Estates Partnership (NEP) held with DWP and commitments in relation to IT infrastructure.

The total amount charged in the Consolidated Statement of Comprehensive Net Expenditure in respect of on‑Statement of Financial Position PFI and other service concession arrangement transactions (there were no off‑Statement of Financial Position transactions) was £84 million (2024 to 2025: £68.4 million).

The substance of each contract is that payments comprise 2 elements — lease payments and service elements.

Details of the obligations for lease payments

	2025-26 Department £m	2024-25 Department £m
Minimum lease payments:
Due within one year	9.1	5.9
Due between one year and 5 years	8.6	6.2
Due later than 5 years	–	–
Total minimum lease payments due in future periods	17.7	12.1

Details of the obligations for service elements

	2025-26  Department £m	2024-25  Department £m
Service elements due in future periods:
Due within one year	25.0	25.5
Due between one year and 5 years	–	25.4
Due later than 5 years	–	–
Total service elements due in future periods	25.0	50.9
Total commitments	42.7	63.0

9. Capital and other financial commitments

9.1. Capital commitments

The capital commitments reported relate to the future cost of development of the estate and IT infrastructure.

Contracted capital commitments at 31 March not otherwise included in these financial statements

	2025-26 Department £m	2024-25 Department £m
Property, plant and equipment	100.6	74.6
Intangible assets	66.7	54.5
	167.3	129.1

9.2. Other financial commitments

This note discloses commitments to future expenditure, not otherwise disclosed elsewhere in the financial statements. These are non‑cancellable contracts that the department has entered into (which are not a lease, PFI contract or other service concession arrangement), for the provision of goods and services.

The payments to which the department are committed are as follows:

	2025-26 Department £m	2024-25 Department £m
Due within one year	414.8	341.0
Due between one year and 5 years	496.2	651.3
Due later than 5 years	97.2	86.5
	1,008.2	1,078.8

10. Trade receivables, financial and other assets

	Note	2025-26 Department £m	2024-25 Department £m
Amounts expected to be received within one year
Personal tax credits	3.1.2	127.4	183.9
Child Benefit (note 1)		167.3	73.0
Help to Save		6.7	8.1
Deposits and advances		156.9	152.9
Value Added Tax		70.7	54.5
Prepayments — Child Benefit		111.5	90.5
Accrued income, other prepayments		166.0	250.6
Transitional Support Scheme loans	16	0.9	–
Trade and other receivables (note 2)		45.0	61.4
		852.4	874.9
Amounts falling due after more than one year		201.1	290.4
Personal tax credits	3.1.2
		201.1	290.4

Notes:

1. This figure is net of provision for impairment amounting to £28.2 million (2024 to 2025: £28.2 million).
2. This figure includes other receivables, which are net of provision for impairment amounting to: £24.7 million (2024 to 2025: £23.3 million).

11. Cash and cash equivalents

Cash and bank balances relate to the administering of the department and programme expenditure but exclude all tax and duty revenues collected. The latter are included in the department’s Trust Statement. Cash and cash equivalents comprise cash in hand and current balances, which are readily convertible to known amounts of cash and which are subject to insignificant changes in value. Bank accounts are part of the Exchequer pyramid whereby balances are effectively held overnight with the Bank of England.

Cash and cash equivalents

	2025-26 Department £m	2024-25 Department £m
Balance at 1 April	68.6	41.0
Net change in cash and cash equivalent balances	(11.4)	27.6
Balance at 31 March	57.2	68.6
Of which balances were held at:
Government Banking Service	52.4	71.6
Commercial banks and cash in hand (note)	4.8	(3.0)
Balance at 31 March	57.2	68.6

Note: The balance also reflects money owing to/from the Trust Statement.

11.1. Reconciliation of liabilities arising from financing activities

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.

	Balance at 31 March 2025 £m	Opening balance adjustment £m	Financing £m	Cash flows Net cash requirement £m	Acquisition £m	Fair value changes £m	Disposal £m	Balance at 31 March 2026 £m
Supply	68.7	–	21,469.9	(21,481.2)	–	–	–	57.4
From the National Insurance Fund	(86.2)	–	260.4	(321.9)	–	–	147.7	–
Lease liabilities	1,208.3	(0.4)	(83.1)	–	8.0	118.9	(6.1)	1,245.6
Total liabilities from financing activities	1,190.8	(0.4)	21,647.2	(21,803.1)	8.0	118.9	141.6	1,303.0

	Balance at 31 March 2024 £m	Opening balance adjustment £m	Financing £m	Cash flows Net cash requirement £m	Acquisition £m	Fair value changes £m	Disposal £m	Balance at 31 March 2025 £m
Supply	35.5	–	20,686.1	(20,652.9)	–	–	–	68.7
From the National Insurance Fund	(5.5)	(59.6)	257.7	(278.8)	–	–	–	(86.2)
Lease liabilities (note)	1,262.0	(0.4)	(76.3)	–	5.1	26.8	(8.9)	1,208.3
Total liabilities from financing activities	1,292.0	(60.0)	20,867.5	(20,931.7)	5.1	26.8	(8.9)	1,190.8

Note: Of the £31.9 million of IFRS 16 lease acquisitions reported in 2024 to 2025, £26.8 million relates to rent reviews and has been reclassified and restated as fair value changes, as it does not represent new leases.

12. Trade and other payables

	2025-26 Department £m	Restated 2024-25 Department £m (note 1)
Amounts expected to be paid within one year:
Accruals — Tax‑Free Childcare	47.5	46.6
Accruals	552.3	472.5
Personal tax credits	257.5	319.5
Child Benefit (note 2)	409.7	270.8
Trade and other payables	151.0	105.8
Taxation and social security excluding VAT	79.3	64.9
Deferred income	15.4	21.5
Amounts issued from the Consolidated Fund for Supply but not spent at year end	57.4	68.7
Consolidated Fund Extra Receipts due to be paid to the Consolidated Fund:
Received	–	–
	1,570.1	1,370.3
Amounts expected to be paid in more than one year:
IT Public Private Partnership	3.2	2.3
Accommodation PFI	–	4.9
Other payables	14.8	8.6
	18.0	15.8

Notes:

1. Certain prior year figures have been restated as per note 1.2.
2. Child Benefit includes accruals for £60 million relating to Social Benefits reporting introduced in 2025 to 2026, the prior year has not been restated as the value is immaterial. See note 1.6.

13. Provisions for liabilities and charges

Provisions are recognised when HMRC has a present legal or constructive obligation as a result of a past event, it is probable that HMRC will be required to settle that obligation, and an amount has been reliably estimated.

Provisions for liabilities and charges

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.

	Personal tax credits £m	Stakeholder pensions £m	Legal claims £m	Other £m	2025-26 Department Total £m		2024-25 Department £m
Balance at 1 April	210.0	141.3	84.6	6.9	442.8		130.3
Provided in the year	–	65.7	114.4	28.9	209.0	379.8
Provisions not required written back	(66.8)	–	(15.0)	(2.5)	(84.3)	(58.3)
Net expenditure	(66.8)	65.7	99.4	26.4	124.7	321.5
Provisions utilised in the year	(72.3)	(141.3)	(9.7)	(1.3)	(224.6)	(9.0)
Balance at 31 March	70.9	65.7	174.3	32.0	342.9	442.8

13.1. Analysis of expected timing of cash flows

	Personal tax credits £m	Stakeholder pensions £m	Legal claims £m	Other £m	2025-26 Department  Total	2024-25 Department £m
Not later than one year	57.0	65.7	91.2	15.3	229.2	367.7
Later than one year and not later than 5 years	13.9	–	67.9	16.0	97.8	48.8
Later than 5 years	–	–	15.2	0.7	15.9	26.3
Balance at 31 March	70.9	65.7	174.3	32.0	342.9	442.8

Personal tax credits

The provision relates to net underpayments identified on customer records as part of personal tax credits closure activities.

Stakeholder pensions

The provision accounts for the estimated value of HMRC top‑ups to non‑taxpayers’ contributions to Relief at Source schemes, known as Stakeholder pensions.

The prior year provision balance of £141.3 million accounted for the difference between initial and final estimates in prior years and was paid over in full to Trust Statement in 2025 to 2026.

Legal claims

The provision relates to legal claims against the department for tax litigation cases accounted for within the Trust Statement. This reflects all known claims where legal advice indicates that it is probable that the case will be successful.

Other

The provision relates to various other claims against the department. This includes a value for dilapidation liabilities of £6 million for private landlord leases which may be incurred when properties are vacated at the end of their contracts.

Discounting has not been applied to these provisions as the effect of the time value of money is not material to the financial statements.

14. Pension asset/liability

The Valuation Office Agency (VOA) merged with The Rent Service on 1 April 2009, taking on staff who are members of the Local Government Pension Scheme. Some VOA employees are members of the London Pensions Fund Authority (LPFA) which forms part of the Local Government Pension Scheme. The pension assets part of the Local Government Pension Scheme are reflected in the Consolidated Statement of Financial Position (CSoFP).

The impact on the HMRC CSoFP is immaterial, the table below shows the pension assets and liabilities that results in a net asset.

	2025-26 £m	2024-25 £m
Fair value of fund assets (bid value)	229.9	231.8
Present value of defined benefit obligation	(116.1)	(109.9)
Net asset	113.8	121.9
Present value of unfunded obligations	(0.2)	(0.2)
Remeasurement of net defunded benefit pension asset for changes in asset ceiling	(101.8)	(118.1)
Net asset in the statement of Financial Position	11.8	3.6

Due to insufficient evidence available for the purposes of the VOA financial statements audit, the C&AG’s auditor opinion on the VOA accounts is qualified. Further information can be found in the VOA Annual Report and Accounts.

15. Contingent liabilities

The department’s contingent liabilities are possible obligations that arise from past events and for which existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within HMRC’s control. An example is legal action where the department may need to pay legal costs if it loses the case. These are not disclosed where disclosure could seriously prejudice the outcome of legal claims against the department.

The department has the following quantifiable contingent liabilities:

	2025-26 Department £m	2024-25 Department £m
Legal claims	145.3	132.5
Dilapidations (note)	61.7	19.1
Guaranteed costs	0.2	0.6
Other	84.2	81.4

Note: Dilapidations were included within Other in 2024 to 2025.

Legal claims — Relate to claims against the department for tax litigation cases where provision for the tax repayment is accounted for in the Trust Statement. The contingent liability for legal costs reflects all known claims where legal advice indicates that it is possible that the case will be successful.

Dilapidations –— Costs for dilapidation liabilities for private landlord leases which may be incurred when properties are vacated at the end of their contracts.

Guaranteed costs – Possible liability where appointed liquidators have been guaranteed payment of their costs with a view to recovery of outstanding tax liabilities. In 2025 to 2026, there were 29 cases (2024 to 2025, 34 cases).

Other — Further contingent liabilities where the department may incur a possible liability.

The department has unquantifiable contingent liabilities that arise in some legal claims because the outcome, timing, and financial impact of the related cases remain uncertain, and the department is unable to make a reliable estimate of any potential obligation at the reporting date.

16. Financial instruments

As the cash requirements of the department are met through the Estimates process, financial instruments play a more limited role in creating and managing risk than would apply to a non-public sector body of a similar size. The majority of financial instruments relate to contracts for non‑financial items in line with the department’s expected purchase and usage requirements and the department is therefore usually exposed to little credit, liquidity or market risk.

This year HMRC issued Transitional Support Scheme Loans to former employees (totalling £0.9 million) due to delays in pension payments being made by the new Civil Service Pension Scheme administrator, Capita, who took over administration of the scheme in December 2025. These loans are recognised as receivables on the SOFP. Due to the short‑term nature of the loans HMRC has assessed the likelihood of default is negligible, and the time value of repayment is not material since our expectation is to fully recover the loans in the short‑term.

17. Related‑party transactions

The department is the parent of the Valuation Office Agency. This body is regarded as a related party with which the department has had various material transactions during the year. Please see note 20 for changes to the Valuation Office Agency status as an executive agency.

The Valuation Office Agency has had a significant number of material transactions with other government departments. Most of these transactions have been with the Ministry of Housing, Communities and Local Government, the Department for Work and Pensions and the Welsh Government.

In addition, the department has had a small number of transactions with other government departments and other central government bodies.

No board member, key manager or other related party has undertaken any material non‑remuneration transactions with the department during the year. Details of compensation for key management personnel can be found in the remuneration report within the accountability section.

18. Entities within the departmental boundary

The Valuation Office Agency is a supply‑financed agency. Its Annual Report and Accounts are published on VOA.GOV.UK.

19. Investments and loans in other public sector bodies

The department holds no ordinary shares, loans, public dividend capital or other interests in public bodies outside the departmental boundary.

20. Events after the reporting period date

On 28 April 2025, as part of its Tax Update: Simplification, Administration and Reform (TUSAR), the government announced that VOA will be brought back into its parent department, HMRC, by April 2026. The VOA ceased to exist as an executive agency on 31 March 2026, becoming Valuation Office group within HMRC. Its functions and operations remain critical to providing the valuations that underpin the collection of local authority funding and these will continue to be performed from within HMRC, (see page 12).

These accounts have been authorised for issue by the Accounting Officer on the same date as the Comptroller and Auditor General’s Audit Certificate.

Annex 1: Arm’s‑length bodies

Information on arm’s‑length bodies is shown on page 79 within the Governance statement. The following bodies are those within our accounting boundary for 2025 to 2026 that contribute to the departmental group.

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.

				Permanently employed staff	Other staff (note 1)
	Total operating income £’000	Total operating expenditure £’000	Net expenditure for the year (including financing) £’000	Number of employees	Staff costs £’000	Number of employees	Staff costs £’000
HMRC	(319,033)	32,497,832	32,192,193	66,416	3,689,014	2,379	51,433
VOA	(59,238)	323,312	264,398	3,652 (note 2)	213,429	658 (note 2)	23,979

Notes:

1. ‘Other staff’ includes Fixed Term Appointments and Temporary Fixed Term Appointments.
2. Staffing figures for VOA within this report are consistent with the approach adopted by HMRC. However, VOA has adopted a marginally different approach for staffing figures within the VOA 2025 to 2026 Annual Report and Accounts.

Annex 2: Statistical Tables

This table provides further detail by category on HMRC spending.

Table 1: Total departmental spending (£000)

	2021-22 Outturn	2022-23 Outturn	2023-24 Outturn	2024-25 Outturn	2025-26 Outturn	2026-27 Plans
Resource DEL (note 1)
HMRC administration	4,570,843	5,199,284	5,271,201	5,354,901	5,994,935	6,495,738
VO Administration	143,995	132,548	183,309	201,708	241,093	–
Utilised provisions	31,502	19,614	10,004	7,995	–	–
National Insurance Fund	251,344	259,413	277,222	274,510	317,713	242,429
Cost of Living	-	717,872	760,000	‑5,248	‑2,074	–
COVID‑19	719,062	‑110	-	-	–	–
Total Resource DEL	5,716,746	6,328,621	6,501,736	5,833,866	6,551,667	6,738,167
Of which:
Staff costs	2,862,995	3,265,139	3,477,418	3,613,969	4,052,509	4,418,057
Purchase of goods and services	1,842,658	1,903,404	1,907,881	1,787,446	1,990,405	2,632,954
Income from sales of goods and services	‑269,435	‑268,378	‑370,010	‑445,724	‑365,780	‑448,000
Current grants to persons and non-profit bodies (net)	743,791	720,321	757,241	‑4,654	4,309	2,028
Current grants abroad (net)	1,025	1,043	1,672	1,811	905	1,140
Rentals	277,172	159,943	112,242	112,550	97,413	94,514
Depreciation (note 2)	174,352	478,237	532,926	694,842	696,420	–
Other resource	84,188	68,912	82,366	73,626	75,486	37,474
	5,716,746	6,328,621	6,501,736	5,833,866	6,551,667	6,738,167
Resource AME (note 1)
Child Benefit	11,420,034	11,595,575	12,510,146	13,302,821	13,438,890	14,728,729
Tax‑Free Childcare	428,406	494,401	635,340	617,876	599,977	638,375
Gift aid small donations scheme	25,000	‑72,029	25,000	35,000	25,038	40,000
Stakeholder pensions	105,003	80,002	148,626	157,610	176,456	182,121
Lifetime ISA	418,943	436,809	499,125	624,403	693,702	766,928
Help to Save	20,361	53,202	51,654	45,031	41,053	57,251
HMRC administration	8,072	33,808	‑3,987	120,587	199,912	738,710
VOA — Business Rates for Diplomatic Missions and Organisations	78,061	64,199	83,738	82,778	83,716	113,150
VOA Administration	1,010	1,082	853	898	764	–
Utilised provisions	‑31,510	‑19,615	‑14,730	‑7,997	–	–
Personal tax credits	10,605,481	8,834,945	7,307,214	2,669,737	‑160,155	1
Corporation Tax Relief	11,692,809	12,556,432	12,049,061	10,123,350	10,764,061	11,822,864
Guardians Allowance	3,792	3,914	4,221	4,306	4,228	4,613
COVID‑19	16,543,682	‑132,476	‑21,800	‑1,140	‑789	–
Total Resource AME	51,319,144	33,930,249	33,274,461	27,775,259	25,866,853	29,092,742
Of which:
Purchase of goods and services	83,492	68,188	89,053	87,917	89,053	120,750
Income from sales of goods and services	‑4,412	‑3,918	‑5,200	‑4,957	‑5,169	‑5,600
Current grants to persons and non‑profit bodies (net)	39,076,439	21,426,819	21,311,587	17,456,784	14,819,189	16,418,018
Subsidies to private sector companies	12,186,849	12,423,956	11,897,211	10,122,209	10,763,272	11,822,864
Depreciation (note 2)	9,514	12,752	12,208	11,604	35,437	726,710
Take up of provisions	‑2,222	22,067	‑15,327	108,983	174,040	50,000
Release of provision	‑31,299	‑19,615	‑15,071	‑7,099	‑8,969	‑40,000
Other resource	783	-		‑182	–	–
	51,319,144	33,930,249	33,274,461	27,775,259	25,866,853	29,092,742
Resource budget (note 1)
Total Resource DEL	5,716,746	6,328,621	6,501,736	5,833,866	6,551,667	6,738,167
Total Resource AME	51,319,144	33,930,249	33,274,461	27,775,259	25,866,853	29,092,742
Total Resource budget	57,035,890	40,258,870	39,776,197	33,609,125	32,418,520	35,830,909
Of which:					731,857	726,710
Depreciation (note 2)	183,866	490,989	545,134	706,446
Capital DEL (note 1)
Capital DEL (note 1)
HMRC administration	643,880	524,552	695,753	686,362	832,549	872,633
VOA administration	20,650	31,848	29,364	41,709	43,172	–
Total Capital DEL	664,530	556,400	725,117	728,071	875,721	872,633
Of which:
Purchase of assets	982,938	644,473	805,498	750,944	891,065	913,633
Income from sales of assets	‑318,408	‑88,073	‑80,381	‑22,873	‑15,344	‑41,000
	664,530	556,400	725,117	728,071	875,721	872,633
Capital AME (note 1)
Child Benefit	7	1	2	2	2	10
HMRC administration	–	–	–	–	4,076	20,300
VOA administration	-	-	-	-	1,963	–
Total Capital AME	7	1	2	2	6,041	20,310
Of which:					6,041	20,310
Capital grants to persons and non-profit bodies (net)	7	1	2	2
	7	1	2	2	6,041	20,310
Capital budget (note 1)
Total Capital DEL	664,530	556,400	725,117	728,071	875,721	872,633
Total Capital AME	7	1	2	2	6,041	20,310
Total Capital budget	664,537	556,401	725,119	728,073	881,762	892,943

Notes:

1. Outturn values are consistent with those reported in SoPS 1.1.
2. The depreciation plans in 2026 to 2027 reflect the updated HM Treasury guidance which reclassifies depreciation and impairments from Resource DEL to Resource AME.

Note: The totals may differ to the information in the Statement of Parliamentary Supply due to rounding.

This table shows HMRC administration expenditure, utilised provisions and the administration element of the National Insurance Fund. This table does not include programme expenditure.

Table 2: Administration budget (£000)

	2021-22 Outturn	2022-23 Outturn	2023-24 Outturn	2024-25 Outturn	2025-26 Outturn	2026-27 Plans
Resource DEL
HMRC administration	828,681	948,413	918,850	1,002,674	1,102,494	1,100,832
National Insurance Fund	56,030	54,712	63,962	64,082	77,327	53,966
Total administration budget	884,711	1,003,125	982,812	1,066,756	1,179,821	1,154,798
Of which:
Staff costs	437,580	474,413	560,426	618,437	721,366	730,589
Purchase of goods and services	374,643	450,180	425,260	420,528	459,426	524,218
Income from sales of goods and services	‑94,887	‑59,763	‑89,116	‑117,781	‑132,888	‑112,804
Current grants to persons and non‑profit bodies (net)	1,642	1,659	1,936	1,829	2,015	–
Rentals	110,563	39,512	24,279	58,013	37,646	15,147
Depreciation	30,933	86,522	50,496	73,795	78,203	–
Other resource	24,237	10,602	9,531	11,935	14,053	‑2,352
	884,711	1,003,125	982,812	1,066,756	1,179,821	1,154,798

Note: The totals may differ to the information in the Statement of Parliamentary Supply due to rounding.

Annex 3: Sustainability data tables

Greening Government Commitments (GGC)

	2017-18 (note)	2023-24	2024-25	2025-26
Greenhouse gas emissions (tonnes CO2e, 000s)	88.4	30.6	29.9	27.5
Direct building emissions (tonnes CO2e, 000s)	25.4	11.7	10.6	9.7
Domestic flight emissions (tonnes CO2e, 000s)	2.2	0.9	1.0	1.0
Paper purchased (A4 reams equivalent, 000s)	295.3	30.2	28.3	25.0
Water consumption (m3 000s)	566.1	207.2	225.5	215.6
Waste generated (tonnes, 000s excl. ICT)	9.5	3.1	2.8	2.8
Waste to landfill (% excl. ICT)	1.9	–	–	0.0
Waste recycled (% excl. ICT)	81	68	69	64.5
ICT waste recycled (tonnes)	70.6	47.5	3.6	4.0
ICT waste reused (tonnes)	213.8	75.3	18.2	18.2

Note: This is in the baseline year for our GGC commitments.

Greenhouse gas emissions

	2023-24	2024-25	2025-26
Non-financial indicators (tCO2e, 000s)
Total gross emissions	32.87	33.16	30.31
Total net emissions	20.47	20.77	19.68
Gross emissions Scope 1 and 2	26.73	25.41	21.60
Gross emissions Scope 3 (business travel)	6.14	7.75	7.48
Energy consumption (kWh, 000s)
Electricity: non‑renewable	2,164	2,323	2,692
Electricity: renewable	55,135	54,969	54,871
Gas	62,559	57,432	52,170
Oil	820	300	290
Whitehall District Heating	N/A	N/A	N/A
Enviroenergy District Heating	N/A	N/A	N/A
Stratford District Heating	6,368	5,136	5,328
Sheffield District Heating	N/A	N/A	N/A
Travel breakdown (tCO2e, 000s)
Road	2.43	2.62	2.63
Rail	1.54	1.86	2.11
Air (domestic and overseas)	3.15	4.22	3.76
Ultra Low Emission Vehicles (% of fleet )	29	41	45
Financial indicators (£000)
Expenditure on energy	23,375	24,144	22,634
Expenditure on accredited offset purchases	–	–	–
Expenditure on official business travel	19,610	20,853	22,781

Waste (note)

	2023-24	2024-25	2025-26
Non-financial indicators (Tonnes 000s)
Total waste (excl. ICT)	3.11	2.80	2.75
Waste: Landfill	0.00	0.00	0.00
Waste: Recycled/composted	2.13	1.92	1.78
Waste: Incinerated/energy from waste	0.99	0.88	0.97
ICT waste	0.12	0.02	0.02
Financial indicators (£000s) (note)
Total waste (excl. ICT)	174	157	N/A
Waste: Landfill	–	–	N/A
Waste: Recycled/composted	119	108	N/A
Waste: Incinerated/energy from waste (note 2)	55	49	N/A
ICT waste	661	–	N/A

Food waste

	2024-25	2025-26
Reuse: Redistribution for human consumption	–	–
Animal feed	–	–
Bio‑based materials/Biochemical processing	–	–
Other reuse
Waste: Anaerobic digestion/codigestion	43.76	135.18
Composting/Aerobic processes	–	–
Incineration/Controlled combustion	–	–
Land application	–	–
Landfill	–	–
Sewer/Wastewater treatment	–	–
Refuse/Discards/Litter (incl. dumping and unmanaged disposal)	–	–
Other	–	–
Total food waste	43.76	135.18

Notes:

1. Following the implementation of a new contract for facilities management, reliable financial indicators data for 2025 to 2026 is not currently available.
2. Figures may not sum due to rounding.

Finite resource consumption — water

	2023-24	2024-25	2025-26
Financial indicators (£000s)
Water consumption — supplied	1,278	1,154	1,750

	2023-24	2024-25	2025-26
Non-financial indicators (£000s)
Water consumption — supplied	207.2	225.5	215.60

Copier paper purchased

	2023-24	2024-25	2025-26
Financial indicators (£000s)	137	124	86

Air travel breakdown (note)

Non-financial indicators	2023-24 No	2023-24 kms	2023-24mtCO2e	2024-25 No	2024-25 kms	2024-25mtCO2e	2025-26 No	2025-26 kms	2025-26 mtCO2e
Total domestic	13,096	5,310,480	854.93	15,374	6,008,038	967.17	17,641	7,182,872	973
Total international	2,512	6,984,380	2,291.85	3,192	9,286,344	3,253.10	4,118	11,647,072	2,951
Short haul economy	1,158	1,243,080	227.32	1,627	1,773,122	324.25	1,900	2,130,924	268
Short haul business	27	36,635	10.05	49	65,714	18.03	60	127,669	195
Short haul premium economy	–	–	–	–	–	–	1	811	0
Long haul economy	563	2,629,894	527.55	399	1,952,200	390.65	356	1,667,260	195
Long haul premium economy	61	330,856	105.93	38	241,354	77.27	111	611,282	114
Long haul business	442	2,259,994	1,311.45	752	3,510,151	2,036.87	1,080	5,450,485	1,850
Long haul first	4	23,644	18.93	26	131,792	105.49	8	43,240	20
International non‑UK	257	460,276	90.63	301	1,612,011	300.54	602	1,615,401	309

Note: Figures may not sum due to rounding