Official Statistics

4. Tax gaps: Income Tax, National Insurance contributions and Capital Gains Tax

Updated 23 June 2026

Summary

The Income Tax, National Insurance contributions (NICs) and Capital Gains Tax gap is estimated using a combination of established and illustrative methodologies. It is made up of 4 main components:

• the Self Assessment tax gap is estimated using random enquiry programme (REP) and risk-based data, and is formed from 3 components: the business Self Assessment tax gap, the non-business Self Assessment tax gap and the illustrative large partnerships Self Assessment tax gap

• the wealthy tax gap is estimated using a combination of REP and risk-based data and forms part of the Self Assessment tax gap

• the PAYE tax gap is estimated using REP data, statistical and illustrative methodologies, and is formed from 3 components: small, mid-sized and large businesses

• the hidden economy tax gap is estimated using a combination of established bottom-up methodologies, including management information and survey data, and is formed of 2 components: moonlighters (individuals who are employees in their legitimate occupation but do not declare earnings from other sources of income) and ghosts (individuals who do not declare any of their earned or unearned income to HMRC)

• the avoidance tax gap relates to marketed avoidance schemes sold primarily to individuals and estimated using an established bottom-up method

To evaluate the uncertainty of the Income Tax, NICs and Capital Gains Tax gap, we assign an uncertainty rating for each tax gap component, ranging from ‘very low’ to ‘very high’:

• the Self Assessment tax gap: the business and non-business tax gaps estimates have ‘medium’ uncertainty, the large partnerships tax gap has ‘very high’ uncertainty, and the wealthy tax gap has ‘high’ uncertainty

• the PAYE tax gap: the small businesses and mid-sized businesses PAYE tax gaps have ‘medium’ uncertainty, and the large businesses PAYE tax gap has ‘very high’ uncertainty

• the hidden economy tax gap: the moonlighters estimate has ‘high’ uncertainty, and the ghosts estimate has ‘very high’ uncertainty

• the avoidance tax gap has ‘high’ uncertainty

More information on the tax gap uncertainty assessment can be found in the ‘Methodological annex’.

Main findings

Figure 4.1 shows the Income Tax, NICs and Capital Gains Tax gap time series in absolute terms and as a percentage of theoretical Income Tax, NICs and Capital Gains Tax liability.

The tax gap for Income Tax, NICs and Capital Gains Tax is 4.0% of the theoretical Income Tax, NICs and Capital Gains Tax liability, or £20.9 billion in absolute terms, in the 2024 to 2025 tax year.

There has been a small long-term reduction in the Income Tax, NICs and Capital Gains Tax gap from 4.5% in 2005 to 2006 to 4.0% in 2024 to 2025. It peaked at 5.3% in 2013 to 2014 but decreased to 3.3% in 2017 to 2018. Since 2017 to 2018, the Income Tax, NICs and Capital Gains Tax gap has been relatively stable,increasing gradually from 3.3% to 4.0%.

Components of the Income Tax, NICs and Capital Gains Tax gap are projected in line with liabilities from earlier years where sufficient actual data is not yet available. Projections for 2024 to 2025 and 2023 to 2024 are based on the 2022 to 2023 estimate.

Figure 4.1: Income Tax, NICs and Capital Gains Tax gap by value and as a percentage of theoretical tax liabilities, 2005 to 2006 up to 2024 to 2025

Notes for Figure 4.1:

1. The full data series can be seen in the online tables.

Figure 4.2 shows the overall, PAYE and Self Assessment Income Tax, NICs and Capital Gains Tax gaps as a percentage of theoretical tax liability. The hidden economy and avoidance tax gaps are not shown because, by their nature, they do not have theoretical tax liabilities from which a percentage tax gap can be calculated. The Self Assessment tax gap as a percentage of theoretical tax liability has consistently been higher than the PAYE tax gap across the time series.

Figure 4.2: Income Tax, NICs and Capital Gains Tax gap as a percentage of theoretical tax liabilities

Notes for Figure 4.2:

1. The full data series can be seen in the online tables.

2. IT, NICs and CGT stands for ‘Income Tax, NICs and Capital Gains Tax’.

3. All IT, NICs and CGT includes Self Assessment, PAYE, hidden economy and avoidance.

Figure 4.3 shows the proportion of the Income Tax, NICs and Capital Gains Tax gap which come from the Self Assessment, PAYE, hidden economy and avoidance tax gaps since 2020 to 2021. Self Assessment is the largest component in each year, with a 70% share in 2024 to 2025, followed by PAYE with a 21% share, hidden economy with an 8% share, and avoidance with a 1% share.

Figure 4.3: Shares of Income Tax, NICs and Capital Gains Tax gap by component

Year	Self Assessment	PAYE	Hidden economy	Avoidance
2020-21	64%	24%	10%	2%
2021-22	66%	24%	9%	2%
2022-23	66%	24%	9%	1%
2023-24	65%	26%	9%	1%
2024-25	70%	21%	8%	1%

Notes for Figure 4.3:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest 1%.

3. Figures may not sum due to rounding.

Self Assessment (Income Tax, NICs and Capital Gains Tax)

Summary

The Self Assessment tax gap is estimated using 3 components:

• the business (self-employed taxpayers and partnerships with up to 4 partners) Self Assessment tax gap, estimated using an established approach based on a combination of REP and risk-based data

• the non-business (individuals without business income and trusts) Self Assessment tax gap, estimated using an established approach based on a combination of REP and risk-based data

• the large partnerships (partnerships with 5 or more partners) Self Assessment tax gap, illustratively estimated by assuming the tax at risk will be a similar proportion of liabilities to all other Self Assessment taxpayers

• the wealthy tax gap is estimated using a combination of REP and risk-based data and forms part of the Self Assessment tax gap

To evaluate the uncertainty of our Self Assessment tax gap, we assign an uncertainty rating for each tax gap component, ranging from ‘very low’ to ‘very high’

• the business and non-business Self Assessment tax gaps have ‘medium’ uncertainty

• the large partnerships tax gap has ‘very high’ uncertainty

• the wealthy tax gap has ‘high’ uncertainty

More information on the tax gap uncertainty assessment can be found in the ‘Methodological annex’.

Figure 4.4 shows the Self Assessment tax gap time series in absolute terms and as a percentage of theoretical Self Assessment tax liability.

The tax gap for Self Assessment is 15.9% of the theoretical Self Assessment tax liability, or £14.6 billion in absolute terms, in the 2024 to 2025 tax year.

There has been a long-term small increase in the Self Assessment tax gap, from 15.1% in 2005 to 2006 to 15.9% in 2024 to 2025. Between 2005 to 2006 and 2012 to 2013 the tax gap rose a peak of 21.8%, before then decreasing to 11.8% in 2017 to 2018. The Self Assessment tax gap was more stable in recent years, varying between 13.4% and 13.6% up to 2021 to 2022, before increasing to 15.9% in 2024 to 2025.

The Self Assessment tax gap estimates for both the business and non-business components are projected from 2023 to 2024 onwards, in line with Self Assessment tax liability.

Due to growth in the Self Assessment tax liability in 2024 to 2025, the Self Assessment tax gap is projected to increase from £11.4 billion in 2023 to 2024 to £14.6 billion in 2024 to 2025.

Figure 4.4: Self Assessment tax gap by value and as a percentage of theoretical tax liability, 2005 to 2006 up to 2024 to 2025

Notes for Figure 4.4:

1. The full data series can be seen in the online tables.

Figure 4.5 shows the proportion of the Self Assessment tax gap by component. The business component has been the largest component in each year, making up 67% of the Self Assessment tax gap in 2024 to 2025. The remaining proportion is equally split between the large partnerships and non-business component for 2024 to 2025.

Figure 4.5 Shares of Self Assessment tax gap by component

Year	Business taxpayers	Large partnerships	Non-business taxpayers
2020-21	73%	16%	11%
2021-22	73%	15%	12%
2022-23	67%	17%	16%
2023-24	70%	16%	14%
2024-25	67%	16%	16%

Notes for Figure 4.5:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest 1%.

3. Figures may not sum due to rounding.

Figure 4.6 shows the overall Self Assessment tax gaps as a proportion of theoretical tax liability, broken down into overall, business (self-employed and small partnerships), non-business and large partnerships (partnerships with 5 or more partners). The business component has the highest percentage gap, more than double the size of the gaps for non-business and large partnerships.

Figure 4.6 Self Assessment tax gap as a percentage of theoretical tax liability, and its components

Notes for Figure 4.6:

1. The full data series can be seen in the online tables.

Main findings

Figure 4.7 shows the Self Assessment tax gap, tax liability and the theoretical tax liability, which is the sum of the tax gap and tax liability, since 2020 to 2021.

The Self Assessment net tax gap has increased from £8.1 billion in 2020 to 2021 to £14.6 billion in 2024 to 2025, with a significant jump between 2023 to 2024 and 2024 to 2025, reflecting strong growth in tax liabilities. The estimate for 2023 to 2024 and 2024 to 2025 are projected in line with the Self Assessment tax liabilities.

The Self Assessment tax liability has increased from £52.2 billion in 2020 to 2021 to £76.9 billion in 2024 to 2025. The theoretical Self Assessment liability has increased from £60.3 billion to £91.5 billion over the same period.

Figure 4.7: Self Assessment tax gap, tax liability and theoretical tax liability, since 2020 to 2021 (£ billion)

Year	Net tax gap	Liability	Theoretical tax liability
2020-21	8.1	52.2	60.3
2021-22	9.9	62.7	72.6
2022-23	10.8	58.0	68.9
2023-24	11.4	60.6	72.0
2024-25	14.6	76.9	91.5

Notes for Figure 4.7:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

4. Liability refers to the actual amount HMRC expects to receive, based on taxpayer declarations and compliance activity.

Figure 4.8 shows the Self Assessment tax gap, and its components: gross tax gap, compliance yield, and non-payment, since 2020 to 2021. The Self Assessment tax gap is calculated as the gross tax gap minus compliance yield plus non-payment.

Both the Self Assessment gross tax gap and net tax gap follow the same trend, generally increasing in absolute terms across the 5 year period. The Self Assessment gross tax gap increased from £9.3 billion in 2020 to 2021 to £15.6 billion in 2024 to 2025. The Self Assessment net tax gap increased from £8.1 billion to £14.6 billion over the same period.

Compliance yield has reduced from £1.8 billion in 2020 to 2021 to £1.7 billion in 2024 to 2025, peaking at £1.9 billion in 2021 to 2022. The non-payment figure remains largely stable between £0.5 billion and £0.6 billion.

Figure 4.8: Components of the Self Assessment tax gap, since 2020 to 2021 (£ billion)

Year	Gross tax gap	Compliance yield	Non-payment	Net tax gap
2020-21	9.3	1.8	0.5	8.1
2021-22	11.1	1.9	0.6	9.9
2022-23	11.7	1.5	0.6	10.8
2023-24	12.5	1.7	0.6	11.4
2024-25	15.6	1.7	0.6	14.6

Notes for Figure 4.8:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

Proportion of Self Assessment returns with under-declared Self Assessment tax liability

The proportion of Self Assessment returns with under-declared tax liability can be estimated from REP data.

Figure 4.9 shows the estimated proportion of incorrect Self Assessment returns where the Self Assessment tax liability has been under-declared for business and non-business taxpayers. The proportion of incorrect Self Assessment returns was broadly stable at around 22% between 2018 to 2019 and 2019 to 2020, before increasing to 31% in 2020 to 2021 and remaining at this level for 2022 to 2023. The proportion of returns with an under-declaration below £500 increased from 7% of returns in 2018 to 2019 to 14% in 2022 to 2023.

Figure 4.9: Proportion of Self Assessment returns with under-declared Self Assessment tax liability

Notes for Figure 4.9:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest 1%.

3. Figures may not sum due to rounding.

Additional findings

Self Assessment business tax gap

Figure 4.10 shows the Self Assessment business (self-employed taxpayers and partnerships with up to 4 partners) tax gap time series in absolute terms and as a percentage of theoretical Self Assessment business tax liability.

The tax gap for Self Assessment business is 29.2% of the theoretical Self Assessment business tax liability, or £9.8 billion in absolute terms, in the 2024 to 2025 tax year.

The Self Assessment business percentage tax gap has increased from 20.7% in 2005 to 2006 to 29.2% in 2024 to 2025. The Self Assessment business tax gap peaked at 31.5% in 2013 to 2014 and then decreased to 18.7% in 2017 to 2018. Since 2017 to 2018, the tax gap has increased to around 29% in recent years.

The Self Assessment business tax gap estimate is projected in line with Self Assessment business tax liability from 2023 to 2024.

Figure 4.10: Self Assessment business tax gap by value and as a percentage of theoretical tax liability, 2005 to 2006 up to 2024 to 2025

Notes for Figure 4.10:

1. The full data series can be seen in the online tables.

Figure 4.11 shows the Self Assessment business tax gap, tax liability, and the theoretical tax liability, which is the sum of the tax gap and tax liability, since 2020 to 2021.

The Self Assessment business net tax gap has increased from £5.9 billion to £9.8 billion over the 5 years. The Self Assessment business tax liability has increased from £16.8 billion to £23.8 billion over the 5 years, with substantial growth between 2020 to 2021 and 2021 to 2022. The theoretical Self Assessment business tax liability has increased from £22.7 billion in 2020 to 2021 to £33.6 billion in 2024 to 2025

Figure 4.11: Self Assessment business tax gap, tax liability and theoretical tax liability, since 2020 to 2021 (£ billion)

Year	Net tax gap	Liability	Theoretical tax liability
2020-21	5.9	16.8	22.7
2021-22	7.2	22.0	29.2
2022-23	7.3	17.6	24.9
2023-24	7.9	19.1	27.0
2024-25	9.8	23.8	33.6

Notes for Figure 4.11:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

4. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Figure 4.12 shows the Self Assessment business tax gap, and its components: gross tax gap, compliance yield and non-payment, since 2020 to 2021. The Self Assessment business tax gap is calculated as the gross tax gap minus compliance yield plus non-payment.

The gross tax gap increased from £6.3 billion in 2020 to 2021 to £9.8 billion in 2024 to 2025. Compliance yield decreased from £0.5 billion in 2020 to 2021 to £0.2 billion in 2024 to 2025. Non-payment was stable at £0.2 billion in each of these years.

Figure 4.12: Components of the Self Assessment business tax gap, since 2020 to 2021 (£ billion)

Year	Gross tax gap	Compliance yield	Non-payment	Net tax gap
2020-21	6.3	0.5	0.2	5.9
2021-22	7.6	0.6	0.2	7.2
2022-23	7.3	0.2	0.2	7.3
2023-24	7.9	0.1	0.2	7.9
2024-25	9.8	0.2	0.2	9.8

Notes for Figure 4.12:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

Figure 4.13 shows the estimated proportion of incorrect Self Assessment returns where the Self Assessment tax liability has been under-declared for business taxpayers only. The proportion of incorrect Self Assessment returns from business taxpayers has increased from 26% in 2018 to 2019 to 42% in 2022 to 2023.

Figure 4.13: For business taxpayers, proportion of Self Assessment returns with under-declared Self Assessment tax liability

Notes for Figure 4.13:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest 1%.

3. Figures may not sum due to rounding.

Self Assessment non-business tax gap

Figure 4.14 shows the Self Assessment non-business (individuals without business income and trusts) tax gap time series in absolute terms and as a percentage of theoretical Self Assessment non-business tax liability.

The tax gap for Self Assessment non-business is 6.5% of the theoretical Self Assessment non-business tax liability, or £2.4 billion in absolute terms, in the 2024 to 2025 tax year.

The Self Assessment non-business tax gap has remained broadly at a comparable level over the longer term, from 6.9% in 2005 to 2006 to 6.5% in 2024 to 2025. There have been some fluctuations over the time series, and the Self Assessment non-business tax gap reached a peak of 15.6% in 2012 to 2013. Since 2013 to 2014 there has been a long-term downward trend, followed by an increase in recent years to 6.5% in 2024 to 2025.

The Self Assessment non-business tax gap estimate is projected in line with Self Assessment non-business tax liability from 2023 to 2024.

Figure 4.14: Self Assessment non-business tax gap by value and as a percentage of theoretical tax liability, 2005 to 2006 up to 2024 to 2025

Notes for Figure 4.14:

1. The full data series can be seen in the online tables.

Figure 4.15 shows the Self Assessment non-business tax gap, tax liability, and the theoretical tax liability, which is the sum of the tax gap and tax liability, since 2020 to 2021.

Self Assessment non-business net tax gap increased from £0.9 billion in 2020 to 2021 to £2.4 billion in 2024 to 2025. The Self Assessment non-business tax liability has increased from £21.5 billion to £34.2 billion over the 5 years, with the largest growth between 2023 to 2024 and 2024 to 2025. The theoretical Self Assessment non-business tax liability has increased from £22.4 billion in 2020 to 2021 to £36.6 billion in 2024 to 2025.

Figure 4.15: Self Assessment non-business tax gap, tax liability and theoretical tax liability, since 2020 to 2021 (£ billion)

Year	Net tax gap	Liability	Theoretical tax liability
2020-21	0.9	21.5	22.4
2021-22	1.2	25.1	26.3
2022-23	1.7	24.8	26.5
2023-24	1.6	25.9	27.5
2024-25	2.4	34.2	36.6

Notes for Figure 4.15:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

4. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Figure 4.16 shows the Self Assessment non-business tax gap, and its components: gross tax gap, compliance yield and non-payment, since 2020 to 2021. The Self Assessment non-business tax gap is calculated as the gross tax gap minus compliance yield plus non-payment.

The gross tax gap increased from £1.5 billion to £3.3 billion over the 5 years. Compliance yield increased from £0.8 billion to £1.2 billion. Non-payment increased from £0.2 billion to £0.3 billion over the 5 years.

Figure 4.16: Components of the Self Assessment non-business tax gap, since 2020 to 2021 (£ billion)

Year	Gross tax gap	Compliance yield	Non-payment	Net tax gap
2020-21	1.5	0.8	0.2	0.9
2021-22	1.8	0.8	0.2	1.2
2022-23	2.4	0.9	0.3	1.7
2023-24	2.5	1.1	0.3	1.6
2024-25	3.3	1.2	0.3	2.4

Notes for Figure 4.16:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

Figure 4.17 shows the estimated proportion of incorrect Self Assessment returns, where the Self Assessment tax liability has been under-declared, for non-business taxpayers only.

The proportion of incorrect Self Assessment returns from non-business taxpayers decreased from 20% in 2018 to 2019 to 18% in 2019 to 2020 and has since increased to 24% in 2022 to 2023. The proportion of incorrect returns with under-declaration below £500 increased from 7% in 2018 to 2019 to 14% in 2022 to 2023.

Between 2018 to 2019 and 2022 to 2023, the proportion of taxpayers with incorrect returns was lower for non-business taxpayers than for business taxpayers (shown in Figure 4.13).

Figure 4.17: For non-business taxpayers, proportion of Self Assessment returns with under-declared Self Assessment tax liability

Notes for Figure 4.17:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest 1%.

3. Figures may not sum due to rounding.

Self Assessment large partnerships

Figure 4.18 shows the Self Assessment large partnerships (partnerships with 5 or more partners) tax gap time series in absolute terms and as a percentage of theoretical Self Assessment large partnerships tax liability. The Self Assessment large partnerships tax gap is illustratively estimated and is not covered by the Self Assessment REP. It is instead derived by assuming that the proportion of tax at risk will be a similar proportion of liabilities to all other Self Assessment taxpayers, based on the REP data.

The tax gap for Self Assessment large partnerships is 11.0% of the theoretical Self Assessment large partnerships tax liability, or £2.3 billion in absolute terms, in the 2024 to 2025 tax year.

Figure 4.18 shows that the Self Assessment large partnerships tax gap has increased from 9.2% in 2005 to 2006 to 15.0% in 2012 to 2013. It then decreased to 7.8% in 2017 to 2018 before increasing to 11.0% in 2024 to 2025.

The Self Assessment large partnerships tax gap estimate is projected in line with Self Assessment tax liability from 2023 to 2024.

Figure 4.18: Self Assessment large partnerships tax gap by value and as a percentage of theoretical tax liabilities, 2005 to 2006 up to 2024 to 2025

Notes for Figure 4.18:

1. The full data series can be seen in the online tables.

Figure 4.19 shows the Self Assessment large partnerships tax gap, tax liability, and the theoretical tax liability, which is the sum of the tax gap and tax liability, since 2020 to 2021.

Self Assessment large partnerships net tax gap increased from £1.3 billion to £2.3 billion over the 5 years. The tax liability increased from £13.8 billion to £18.9 billion over the 5 years. The theoretical Self Assessment large partnership tax liability has increased from £15.1 billion in 2020 to 2021 to £21.3 billion in 2024 to 2025.

Figure 4.19: Self Assessment large partnerships tax gap, tax liability and theoretical tax liability, since 2020 to 2021 (£ billion)

Year	Net tax gap	Liability	Theoretical tax liability
2020-21	1.3	13.8	15.1
2021-22	1.5	15.7	17.2
2022-23	1.9	15.6	17.5
2023-24	1.8	15.7	17.5
2024-25	2.3	18.9	21.3

Notes for Figure 4.19:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

4. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Figure 4.20 shows the Self Assessment large partnerships tax gap, and its components: gross tax gap, compliance yield and non-payment, since 2020 to 2021. The Self Assessment large partnerships tax gap is calculated as the gross tax gap minus compliance yield plus non-payment.

The Self Assessment large partnerships gross tax gap increased from £1.6 billion in 2020 to 2021 to £2.5 billion in 2024 to 2025. Compliance yield was broadly stable between £0.3 billion and £0.5 billion. Non-payment was broadly stable between £0.1 billion and £0.2 billion during the same period.

Figure 4.20: Components of the Self Assessment large partnerships tax gap, since 2020 to 2021 (£ billion)

Year	Gross tax gap	Compliance yield	Non-payment	Net tax gap
2020-21	1.6	0.4	0.1	1.3
2021-22	1.8	0.5	0.2	1.5
2022-23	2.1	0.4	0.2	1.9
2023-24	2.1	0.4	0.2	1.8
2024-25	2.5	0.3	0.2	2.3

Notes for Figure 4.20:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

Wealthy taxpayers in Self Assessment

Taxpayers in Self Assessment are defined as wealthy if their income is greater than £200,000 or they have assets equal to or above £2 million. Wealthy taxpayers have complex tax affairs and have tax liabilities which cut across the 3 Self Assessment tax gap components: business, non-business and large partnerships.

Figure 4.21 shows the wealthy taxpayers Self Assessment tax gap time series in absolute terms and as a percentage of wealthy taxpayers theoretical Self Assessment tax liability.

The tax gap for wealthy taxpayers in Self Assessment is 5.4% of the theoretical tax liability for wealthy Self Assessment taxpayers, or £3.4 billion in absolute terms, in 2024 to 2025.

The wealthy taxpayers Self Assessment tax gap has increased in recent years, rising from 4.0% in 2020 to 2021 to 5.4% in 2024 to 2025.

For years before 2015 to 2016, the Self Assessment tax gap estimates for wealthy taxpayers are illustrative, based on the total Self Assessment tax gap, due to data not being available in the required format for earlier years. Therefore, figures from 2015 to 2016 are not directly comparable to previous years.

The wealthy Self Assessment tax gap estimate for the business and non-business components are projected in line with wealthy Self Assessment tax liability from 2023 to 2024 onwards.

Figure 4.21: Estimated wealthy Self Assessment tax gap

Notes for Figure 4.21:

1. The full data series can be seen in the online tables.

Revisions

Figure 4.22 shows the revisions to the Self Assessment tax gap since the publication of the ‘Measuring tax gaps 2025 edition’.

There are changes in the Self Assessment tax gap time series. Settlement data from long-running REP cases, previously forecast for earlier years, alongside updates to forecast values for cases still open, have led to changes in the tax gap estimates up to 2021 to 2022. The 2022 to 2023 estimates are now based on Self Assessment business and non-business REP data rather than being projected from 2021 to 2022.

Figure 4.22: Revisions to the Self Assessment tax gap since the ‘Measuring tax gaps 2025 edition’

Notes for Figure 4.22:

1. The full data series can be seen in the online tables.

2. MTG stands for ‘Measuring tax gaps’.

PAYE (Income Tax and NICs)

Summary

Employers are required to make returns under the PAYE regulations to account for Income Tax and NICs for their employees. The PAYE tax gap is the difference between the amount of Income Tax and NICs that should be collected through PAYE due on earnings and other income from employment, and the amount that is actually paid. The scope of these figures also includes tax due on occupational pensions taxed through PAYE.

The PAYE tax gap is estimated using 3 components:

• the small businesses PAYE tax gap is estimated using an established bottom-up random enquiry methodology

• the mid-sized businesses PAYE tax gap is estimated using an established bottom-up statistical methodology

• the large businesses PAYE tax gap is estimated using an illustrative methodology

To evaluate the uncertainty of the PAYE tax gap, we assign an uncertainty rating for each tax gap component, ranging from ‘very low’ to ‘very high’:

• the small businesses PAYE tax gap has ‘medium’ uncertainty

• the mid-sized businesses PAYE tax gap has ‘medium’ uncertainty

• the large businesses PAYE tax gap has ‘very high’ uncertainty

More information on the tax gap uncertainty assessment can be found in the ‘Methodological annex’.

Figure 4.23 shows the PAYE tax gap time series in absolute terms and as a percentage of theoretical tax liability.

The PAYE tax gap is 1.0% of the theoretical PAYE tax liability, or £4.4 billion in absolute terms, in the 2024 to 2025 tax year.

There has been an overall reduction in the PAYE tax gap from 1.6% to 1.0% between the 2005 to 2006 and 2024 to 2025 tax years. The tax gap decreased from 1.6% in 2005 to 2006 to 0.9% in 2018 to 2019. Since 2018 to 2019 the tax gap has been broadly stable around 1.0%.

The components of the PAYE tax gap are projected in line with PAYE tax liability from 2023 to 2024 where sufficient actual data is not yet available.

Figure 4.23: PAYE tax gap by value and as a percentage of theoretical tax liability, 2005 to 2006 up to 2024 to 2025

Notes for Figure 4.23:

1. The full data series can be seen in the online tables.

Figure 4.24 shows the PAYE tax gaps for small businesses, mid-sized businesses, large businesses and all businesses as a proportion of theoretical tax liability.

Generally, the PAYE tax gap is one of the lowest tax gaps compared to other tax regimes.

The PAYE tax gap for small businesses decreased from a high of 2.3% in 2015 to 2016 to 0.9% in 2017 to 2018, before following an upward trend, reaching 1.2% in 2024 to 2025.

The mid-sized businesses PAYE tax gap was volatile between 2016 to 2017 and 2020 to 2021 and peaked at 1.8% in 2017 to 2018. It has decreased to a projected 0.8% in 2024 to 2025.

The large businesses PAYE tax gap is estimated at 1.1% in 2024 to 2025 and is an illustrative estimate.

Figure 4.24 PAYE tax gap as a percentage of theoretical tax liability by component

Notes for Figure 4.24:

1. The full data series can be seen in the online tables.

Revisions

Figure 4.25 shows the revisions to the overall PAYE tax gap since the publication of the ‘Measuring tax gaps 2025 edition’.

From 2014 to 2015 onwards there are generally minor revisions in the mid-sized businesses PAYE tax gap. As compliance cases can take many years to close, the compliance yield of open cases is forecasted. Estimates are likely to be revised between publications due to differences between forecast and actual compliance yield.

For the mid-sized businesses PAYE tax gap in ‘Measuring tax gaps 2026 edition’, the extreme values methodology used to estimate the lower bound has been improved, resulting in very minor revisions to the tax gap. Further detail can be found in the ‘Methodological annex’.

Revisions to the PAYE tax gap from 2022 to 2023 onwards are primarily driven by the small businesses PAYE tax gap. This is due to settlement data of long-running cases included in the REP for which we had to previously forecast the outcome for earlier years and updates to forecast values of REP cases that remain open.

Figure 4.25: Revisions to the PAYE tax gap since the ‘Measuring tax gaps 2025 edition’

Notes for Figure 4.25:

1. The full data series can be seen in the online tables.

2. MTG stands for ‘Measuring tax gaps’.

Main findings

Figure 4.26 shows the overall PAYE tax gap, tax liability, and the theoretical tax liability, which is the sum of the tax gap and tax liability, since 2020 to 2021.

The net tax gap has increased from £3.0 billion in 2020 to 2021 to £4.4 billion in 2024 to 2025, mainly due to an increase in liabilities. PAYE liability has increased from £304.8 billion in 2020 to 2021 to £425.4 billion in 2024 to 2025.

The theoretical PAYE tax liability has increased from £307.9 billion in 2020 to 2021 to £429.9 billion in 2024 to 2025.

Figure 4.26: PAYE tax gap, tax liability and theoretical tax liability, since 2020 to 2021 (£ billion)

Year	Net tax gap	Liability	Theoretical tax liability
2020-21	3.0	304.8	307.9
2021-22	3.6	344.4	348.0
2022-23	3.9	382.6	386.5
2023-24	4.5	409.3	413.8
2024-25	4.4	425.4	429.9

Notes for Figure 4.26:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

4. Liability refers to the actual amount expected to be received by HMRC based on taxpayer declarations and HMRC’s compliance activity.

Figure 4.27 shows the overall PAYE tax gap, and its components: gross tax gap, compliance yield and non-payment, since 2020 to 2021. The overall PAYE tax gap is calculated as the gross tax gap minus compliance yield plus non-payment.

The gross tax gap increased from £2.0 billion in 2020 to 2021 to £2.8 billion in 2024 to 2025. Compliance yield was broadly stable between £0.1 billion and £0.2 billion in the past 5 years. Non-payment increased from £1.2 billion in 2020 to 2021 to £1.8 billion in 2024 to 2025.

Figure 4.27: Components of the PAYE tax gap, since 2020 to 2021 (£ billion)

Year	Gross tax gap	Compliance yield	Non-payment	Net tax gap
2020-21	2.0	0.2	1.2	3.0
2021-22	2.3	0.1	1.4	3.6
2022-23	2.4	0.2	1.7	3.9
2023-24	3.0	0.2	1.7	4.5
2024-25	2.8	0.2	1.8	4.4

Notes for Figure 4.27:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

Small businesses

Figure 4.28 shows the small businesses PAYE tax gap, and its components: gross tax gap, compliance yield and non-payment, since 2020 to 2021. The overall PAYE tax gap is calculated as the gross tax gap minus compliance yield plus non-payment.

The gross gap increased from £0.3 billion to £0.7 billion over the last 5 years. Compliance yield has been broadly stable at around £0.1 billion over the 5 years. Non-payment has increased from £0.5 billion in 2020 to 2021 to £0.7 billion in 2024 to 2025. The overall small businesses PAYE tax gap has increased from £0.7 billion in 2020 to 2021 to £1.3 billion in 2024 to 2025.

Figure 4.28: Components of the small businesses PAYE tax gap, since 2020 to 2021 (£ billion)

Year	Gross tax gap	Compliance yield	Non-payment	Net tax gap
2020-21	0.3	<0.1	0.5	0.7
2021-22	0.5	<0.1	0.5	1.0
2022-23	0.4	<0.1	0.6	1.0
2023-24	0.9	0.1	0.6	1.5
2024-25	0.7	0.1	0.7	1.3

Notes for Figure 4.28:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

Mid-sized businesses

Figure 4.29 shows the mid-sized businesses PAYE tax gap, and its components: gross tax gap, compliance yield and non-payment, since 2020 to 2021. The overall PAYE tax gap is calculated as the gross tax gap minus compliance yield plus non-payment.

The gross tax gap increased from £0.2 billion in 2020 to 2021 to £0.4 billion in 2024 to 2025. Compliance yield has remained stable around £0.1 billion over the 5 years.

Non-payment increased from £0.5 billion to £0.6 billion over the 5 years. The net tax gap increased from £0.6 billion in 2020 to 2021 to £1.0 billion in 2024 to 2025, mainly due to an increase in mid-sized businesses PAYE liabilities.

Figure 4.29: Components of the mid-sized businesses PAYE tax gap, since 2020 to 2021 (£ billion)

Year	Gross tax gap	Compliance yield	Non-payment	Net tax gap
2020-21	0.2	<0.1	0.5	0.6
2021-22	0.3	<0.1	0.5	0.8
2022-23	0.4	0.1	0.6	0.9
2023-24	0.4	0.1	0.6	1.0
2024-25	0.4	0.1	0.6	1.0

Notes for Figure 4.29:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

Large businesses

Figure 4.30 shows the large businesses PAYE tax gap, and its components: gross tax gap, compliance yield and non-payment, since 2020 to 2021. The overall PAYE tax gap is calculated as the gross tax gap minus compliance yield plus non-payment.

The gross tax gap is estimated using historical trends in the small businesses PAYE tax gap and has increased from £1.4 billion in 2020 to 2021 to £1.7 billion in 2024 to 2025 due to increasing large businesses PAYE liabilities.

Compliance yield has been broadly stable around £0.1 billion over the 5 years. Non-payment has increased from £0.3 billion to £0.5 billion over the 5 years.

The net tax gap has increased from £1.6 billion to £2.1 billion over the 5 years mainly due to the increased liabilities.

Figure 4.30: Components of the large businesses PAYE tax gap, since 2020 to 2021 (£ billion)

Year	Gross tax gap	Compliance yield	Non-payment	Net tax gap
2020-21	1.4	0.1	0.3	1.6
2021-22	1.5	<0.1	0.4	1.9
2022-23	1.6	0.1	0.4	1.9
2023-24	1.6	0.1	0.5	2.0
2024-25	1.7	0.1	0.5	2.1

Notes for Figure 4.30:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

Hidden economy (Income Tax, NICs and Capital Gains Tax)

Main findings

The term ‘hidden economy’ refers to sources of taxable economic activity that are entirely hidden from HMRC. It is estimated from 2 components:

• individuals who are employees in their legitimate occupation but do not declare earnings from other sources of income (moonlighters)

• individuals who do not declare any of their income to HMRC, be it earned or unearned (ghosts)

The hidden economy tax gap estimates focus on personal income taxes (Income Tax, NICs and Capital Gains Tax) not paid from moonlighters and ghosts. It does not consider other types of tax.

The hidden economy tax gap is estimated using a combination of established bottom-up management information and survey data.

To evaluate the uncertainty of the hidden economy tax gap, we assign an uncertainty rating for each tax gap component, ranging from ‘very low’ to ‘very high’. The uncertainty rating for moonlighters is ‘high’ and ghosts is ‘very high’.

More information on the tax gap uncertainty assessment can be found in the ‘Methodological annex’.

Figure 4.31 shows the hidden economy tax gap in absolute terms split by moonlighters and ghosts from 2005 to 2006 up to 2024 to 2025.

The hidden economy tax gap on personal income taxes is £1.7 billion in 2024 to 2025, the highest level since the 2005 to 2006 tax year.

The hidden economy tax gap varied between £1.3 billion and £1.7 billion from 2005 to 2006 up to 2024 to 2025.

The tax gap for moonlighters varied between £0.7 billion and £1.0 billion from 2005 to 2006 up to 2024 to 2025. The 2024 to 2025 estimate of £1.0 billion is the highest level over the time series.

The tax gap for ghosts increased from £0.4 billion in 2005 to 2006 to £0.7 billion in 2024 to 2025. The 2024 to 2025 estimate of £0.7 billion is the highest level over the time series.

The hidden economy tax gap is based on a limited number of data points estimated using management information and survey data. The data between these points is imputed. A time series is constructed for years before and after the data points by applying the impact of tax policy changes to the measured data points, to reflect how changes in tax rates and thresholds affect the hidden economy tax gap over time. More information on how the time series is constructed can be found in the ‘Methodological annex’.

Figure 4.31: Hidden economy tax gap by value, 2005 to 2006 up to 2024 to 2025

Notes for Figure 4.31:

1. The full data series can be seen in the online tables.

2. Figures are rounded to the nearest £0.1 billion.

3. Figures may not sum due to rounding.

Revisions

There are no revisions to the hidden economy tax gap since ‘Measuring tax gaps 2025 edition’.

Avoidance (Income Tax, NICs and Capital Gains Tax)

Main findings

Avoidance involves bending the rules of the tax system to try to gain a tax advantage that Parliament never intended. It often involves contrived, artificial transactions that serve little or no purpose other than to produce a tax advantage. It involves operating within the letter, but not the spirit, of the law.

The avoidance tax gap relates to marketed avoidance schemes sold to one or more individuals and employers for a fee, with the aim of reducing their tax liabilities. It is made up of unpaid Income Tax, NICs and Capital Gains Tax that should, in theory, be paid to HMRC. This does not include other types of avoidance related to Corporation Tax or VAT, for example.

The avoidance tax gap is estimated using an established bottom-up method and is net of HMRC compliance activity. This is done using HMRC’s marketed avoidance management information system, which contains information about identified avoidance schemes used by individuals, trusts, partnerships and employers.

To evaluate the uncertainty of our avoidance tax gap, we assign an uncertainty rating for each tax gap component, ranging from ‘very low’ to ‘very high’. The avoidance tax gap estimate is ‘high’.

More information on the tax gap uncertainty assessment can be found in the ‘Methodological annex’.

Figure 4.32 shows the avoidance tax gap time series in absolute terms.

The avoidance tax gap is £0.2 billion for the tax year 2024 to 2025.

There has been a reduction in the avoidance tax gap from £1.5 billion in 2005 to 2006 to £0.2 billion in 2024 to 2025. The avoidance tax gap is projected in 2023 to 2024 and 2024 to 2025 by applying uplifts to the underlying number of users of avoidance schemes based on previous years.

Figure 4.32: Avoidance tax gap by value 2005 to 2006 up to 2024 to 2025

Notes for Figure 4.32:

1. The full data series can be seen in the online tables.

2. The tax gap estimates are projected in 2023 to 2024 and 2024 to 2025 by applying uplifts to the underlying user numbers based on previous years.

Revisions

Figure 4.33 shows the revisions to the avoidance tax gap since the publication of the ‘Measuring tax gaps 2025 edition’.

As audits of avoidance schemes can take several years to complete, there is a time lag in new users of these schemes being identified. Some new users have been identified since ‘Measuring tax gaps 2025 edition’, leading to minor revisions from 2015 to 2016 onward.

HMRC may not identify all avoidance schemes at any given time, which can result in an unquantifiable underestimation of the tax gap. As more avoidance schemes are identified, this may lead to future revisions from 2015 to 2016 onwards. Revisions are not made to the time series prior to 2015 to 2016 as comparable audit data is not available.

Figure 4.33: Revisions to avoidance tax gap since the ‘Measuring tax gaps 2025 edition’

Notes for Figure 4.33:

1. The full data series can be seen in the online tables.

2. MTG stands for ‘Measuring tax gaps’.