Wealthy taxpayers underpay £2.1bn despite HMRC crackdown

Telegraph

6 hours ago

Wealthy individuals underpaid more than £2bn in taxes last year despite a crackdown on hidden earnings.
HMRC estimates the amount of uncollected tax from the richest people rose from £1.9bn to £2.1bn in the financial year ending April 2024.
The so-called 'tax gap' – the difference between taxes the taxman expects to be paid and the amount actually collected – is estimated to be worth £46.8bn.
Wealthy people avoided approximately £200m more in taxes in the previous financial year, figures released by HMRC suggest.
In the last three years, the amount individuals are underpaying in tax has increased by around 17pc per year on average, according to analysis by UHY Hacker Young.
The figure stood at £1.4bn in 2020-21, increasing to £2.1bn in 2023-24 – or 50pc over those three years. The taxman suspects the uncollected taxes are the result of loopholes in the law and illegal tax evasion.
It comes after the Government set out plans to raise billions of pounds in extra revenues by clamping down on unpaid taxes.
James Murray, the Exchequer Secretary, said: 'We are determined to go further and faster to make sure everyone pays their fair share.
'In our first year in office, we have set out plans to raise an extra £7.5bn through the most ambitious ever package to close the tax gap.'
It comes as Rachel Reeves, the Chancellor, is also poised to water down Labour's tax raid on non-domiciled UK residents by reversing a decision to charge inheritance tax on their worldwide assets.
Neela Chauhan, partner at accountants UHY Hacker Young, said: 'These numbers tell you where we can expect HMRC to launch its crackdown – against wealthy people, where unpaid tax is rising.
'Rachel Reeves has allocated substantial new resources to HMRC to step up tax investigations, we expect that to translate into unannounced visits by the taxman and more aggressive mailshots from HMRC to individuals it suspects of underpaying tax.'
Small businesses were blamed for making up the largest share of unpaid taxes, at 60pc. Wealthy individuals were responsible for just 10pc by comparison.
HMRC has zeroed in on high net-worth individuals it suspects of underpaying tax in recent years.
It defines a wealthy individual as someone earning more than £200,000 a year or with assets over £2m in any of the last three years.
There were 850,000 wealthy individuals in 2023-24 who together paid £119bn in personal taxes – a quarter of the nation's personal tax bill.
Since 2019-20, the amount of revenue HMRC has collected from wealthy individuals through investigations and other compliance work has shot up from £2.2bn to £5.2bn.