Investment in HMRC - closing the tax gap

The measure

The government has announced what it calls the most ambitious ever package to close the tax gap - the gap between tax owed and tax paid.  It expects that this investment will raise an additional £6.5billion in tax revenue per year by 2029-30.   

As part of the package, the government has announced measures which include:  

• Recruiting an additional 5,000 compliance staff – with the first 200 starting training in November 2024;
• Funding for 1,800 debt management staff;
• Investing in modernising IT and data systems to improve HMRC’s productivity and improve taxpayers’ experience of dealing with the tax system; 
• Legislating to close certain loopholes or potentially abusive tax arrangements; 
• Confirmation of a commitment to taking stronger action on the most egregious tax fraud by expanding HMRC’s criminal investigation work; and
• Encouraging taxpayers to pay on time by increasing the late payment interest rate charged on overdue tax debts.  

Who will be affected?

All taxpayers could potentially be impacted by this announcement, given the focus on compliance activity and HMRC’s resourcing.  The government states a particular focus on stopping people taking unfair advantage of the tax system.  Taxpayers who do not pay their tax liabilities on time will be impacted in particular by higher interest rates.  

When will the measure come into effect?

Investment in HMRC compliance staff has already commenced.  Budget documents indicate that the majority of the various measures are expected to have positive revenue impacts starting in 2024/25 or 2025/26 and in each year thereafter.