The annual amount of compliance yield from wealthy taxpayers -
the tax revenue that HMRC has collected because of its work to
ensure compliance – increased from £2.2 billion in 2019-20 to
£5.2 billion in 2023-24.
A new report by the National Audit Office (NAO) - Collecting the
right tax from wealthy individuals -examines the extent to which
HMRC is well placed to support wealthy individuals to pay the
right tax.
The increase in compliance yield HMRC
collected from 2019-20 is more than £1 billion greater than
HMRC's annual estimate of the wealthy tax gap and raises the
possibility that underlying levels of non-compliance among the
wealthy population could be greater than previously
thought.
The wealthy tax gap, which is the
difference between the amount of tax that should be paid to HMRC
by wealthy individuals and what was actually paid, is estimated
at £1.9 billion in 2022-23.
Wealthy people contribute significant
amounts of tax revenue to the Exchequer, but their tax affairs
are more complex, due to a mix of income streams, assets and
business interests. This makes it more difficult for HMRC to
identify the tax they owe and presents more opportunities to
deliberately not pay the correct amount due. Nearly
three-quarters (73%) of wealthy individuals are represented by a
tax agent, and HMRC often has little direct contact with the
taxpayer.
Wealthy people (defined by HMRC as
those earning more than £200,000 a year or with assets of more
than £2 million) paid £119 billion in personal taxes to the
Exchequer in 2023-24, an average of £140,000 tax paid per wealthy
individual – this accounted for 25% of the UK's personal tax
receipts.
The population of wealthy individuals
that HMRC oversees has grown from 700,000 in 2019-20 to 850,000
in 2023-24. Around 29,000 wealthy individuals had incomes of at
least £1 million in 2023-24 and were liable for around £34
billion of Income Tax. Within this population are around 10,000
taxpayers with annual incomes of at least £2 million, and 5,000
have assets of at least £50 million.
Up until 2017 HMRC had a dedicated
unit to focus on those taxpayers with assets above £10 million
but now all 850,000 wealthy individuals are dealt with by the
wealthy compliance team, comprising some 910 full-time equivalent
staff.
HMRC allocates a customer compliance
manager to around 15,000 taxpayers it perceives to have the
highest levels of complexity or opportunity for non-compliance.
HMRC has not assessed the level of risk or the impact of its
compliance activities for different wealth bands to understand
whether it should take a particular focus on the wealthiest
individuals.
Measuring the scale of offshore tax
non-compliance is a notably difficult area: HMRC published its
first-ever estimate for undeclared income held in offshore
accounts in 2024, with lost tax revenue valued at £300 million in
2018-19, though this largely only covers undeclared income from
offshore savings rather than other forms of foreign earnings,
such as trading profits and dividends.
HMRC recognises its published estimate is incomplete but has said
it is difficult to expand it to a standard required for
publication. Internally, HMRC has identified a much larger amount
of tax at risk from all forms of offshore non-compliance.
In recent years wealthy taxpayers have
faced fewer penalties. In 2023-24, HMRC issued 456 penalties to
wealthy individuals (representing 5% of cases the wealthy team
closed), totalling £5.8 million. This is down from 2,153
penalties (14% of cases closed) totalling £16.2 million in
2018-19.
HMRC has in-part set out a strategy to
tackle wealthy non-compliance and is keen to continue to tackle
the risk posed by wealthy individuals. It received additional
funding in the Autumn 2024 Budget and Spring 2025 Statement,
including to tackle wealthy offshore non-compliance and fraud by
wealthy taxpayers.
The NAO recommends HMRC reviews its
definition of the wealthy population, as the numbers continue to
grow, and considers how it can provide the public with greater
transparency about the amount of tax that wealthy individuals
pay.
Additionally, the NAO suggests HMRC
should consider assessing the risk of non-compliance posed by the
very wealthy. It should also consider how tax advisers influence
compliance, both positively and negatively, and factor that into
its response.
, head of the NAO,
said:
“HMRC deserves credit for greatly increasing the
additional tax revenue its compliance work has brought in from
wealthy taxpayers, however this may indicate that levels of
non-compliance are higher than previously estimated.
“HMRC should also seek to provide greater transparency to give
greater confidence to the public that all taxpayers contribute
their fair share.”
ENDS
Notes to editors
- The report will be available on the NAO website via the
following link from 00:01 Friday 16 May 2025: https://www.nao.org.uk/reports/collecting-the-right-tax-from-wealthy-individuals/
-
HMRC says that the tax gap and
compliance yield are not directly related. It says its measure
of compliance yield from wealthy taxpayers covers a wider tax
base than the wealthy tax gap.
-
The £849 billion known to be held in
offshore accounts by UK residents at the end of 2019 is limited
to those 93 tax jurisdictions that automatically exchanged
account information with the UK under the Common Reporting
Standard in relation to that year.
