Reacting to: Tax Gap 2024-25 estimated at 6.4% (gov.uk / HMRC) →
HMRC published its provisional tax gap figures for 2024-25 this summer: 6.4% of all tax owed, or £59.2 billion, went unpaid. That's down from 7.5% when HMRC started measuring it back in 2005-06, so the long-run trend is genuinely improving. But the detail that jumped out at us is who makes up the biggest share of that gap: small businesses' non-compliance is the single largest contributor.
"Non-compliance" isn't the same as "fraud"
It's easy to read a headline like that and picture deliberate evasion. In our experience that's rarely what's actually happening. Most small business non-compliance is a VAT return filed on a rough estimate because the bookkeeping was three months behind, an expense claimed in the wrong category, a director's loan account nobody reconciled, or a return submitted late because nobody had time to sit down and do it properly. HMRC's own figures collected £865.2 billion last year — 93.6% of everything owed — so the system mostly works. The gap is concentrated in the businesses that are trying to do it themselves, with imperfect information, under time pressure.
Where this actually gets fixed
The honest fix for most of that gap isn't a crackdown, it's better records kept in real time rather than reconstructed at deadline. That's the entire premise behind cloud bookkeeping done properly — transactions categorised as they happen, VAT positions you can see any day of the month rather than guessed at in a rush, and a set of numbers your accountant has actually reviewed before it goes anywhere near HMRC. It's also why we build Tax Planning in as an ongoing conversation rather than a once-a-year fire drill — the businesses that end up in the "non-compliance" statistic are almost always the ones whose accountant only hears from them at year-end.
None of this requires a bigger business or a bigger budget. It requires the basics being current, all year, not caught up in April. If that's not where your bookkeeping sits right now, our accountancy packages set out what "current" actually looks like and what it costs to get there.