Source · Select Committees · Public Accounts Committee
Recommendation 16
16
Deferred
HMRC's tax debt remains stubbornly high at £43 billion, significantly above pre-pandemic levels.
Conclusion
The amount of tax debt owed by taxpayers to HMRC fell only marginally in 2023–24, from £43.9 billion at 31 March 2023 to £43.0 billion at 31 March 2024 (5.1% of annual tax revenues). This compares with a debt balance of typically £15 billion in the five years before the pandemic, or 2.5% of tax revenues. HMRC has estimated it may not be able to collect 45% of the established tax liabilities not yet received from taxpayers. In 2023–24, it wrote off £5.0 billion of debt, an increase from £3.2 billion in 2022–23.47 HMRC said that most of its write-offs are when taxpayers become insolvent, and that delays in the courts and a suspension on insolvencies as a result of the pandemic created lower-than-expected levels of write-offs in previous years. It expects write-offs to increase again in 2024–25 as these insolvencies then work through the system.48
Government Response Summary
HMRC received more funding for debt collection and will have more staff in 2025-26. HMRC will respond in September 2025 with its expectations for the tax debt balance by 2029-30 and plans for older debts, following the Spending Review Phase 2.
Government Response
Deferred
HM Government
Deferred
The government agrees with the Committee’s recommendation. Target implementation date: September 2025 5.2 The tax debt balance has remained over £40 billion for almost three years, and around half of this is over 12 months old. This is despite HMRC resolving over £100 billion of tax debt each financial year and reflects that the flow of new debt created each year remains higher than historical levels. 5.3 HMRC has received more funding at recent fiscal events to help it collect more tax debt. HMRC will have more staff dedicated to debt collection in 2025-26 than it has had in any year since 2014-15. HMRC is also looking at ways to reduce the amount of new tax debt that arises, including making it easier for customers to pay on time. 5.4 HMRC will respond to the Committee in September 2025 with its expectations for the tax debt balance by 2029-30 and plans for older debts. This will allow for the outcome of the Spending Review Phase 2 to be taken into consideration.