Setting the scene: The tax landscape in 2026
Commercial pressures & increasing tax demands
With UK national debt at a historic £3 trillion and inflation rising, Budget 2026 comes at a time when businesses and individuals alike are facing an increasingly challenging economic climate.
We know that businesses and individuals therefore approach Budget 2026 with competing demands on their resources: managing costs, protecting margins, funding investment and navigating an increasingly complex regulatory environment. Tax is central to those challenges. Higher liabilities place pressure on cash flow, while an HMRC enquiry or delayed repayment can absorb management time and create uncertainty over funds needed for day-to-day operations.
Getting tax right, and managing interactions with HMRC effectively, therefore matters well beyond the tax return. Clear evidence, a considered response and an effective strategy can help prevent an enquiry becoming a prolonged dispute. Where disagreements arise, resolving them efficiently – and challenging HMRC where appropriate – allows businesses to protect their position and focus on their commercial priorities.
The tax take keeps climbing
HMRC reported total revenue of £966.4bn in 2025/26, an increase of £90.4bn on the previous year. Receipts increased across all the main taxes, with particularly notable growth in Capital Gains Tax. The principal figures illustrate the scale of the demands on businesses and individuals:(1)
These increases reflect a combination of economic factors and policy changes. HMRC attributes the growth in Capital Gains Tax revenue to the higher rates from the Autumn Budget 2024 now applying for a full year, reforms to the non‑domiciled tax regime expanding the scope of taxable gains, and the Temporary Repatriation Facility accelerating the recognition of foreign gains at reduced rates.
Although rising revenues do not mean every taxpayer’s liability has increased, the figures underline the growing aggregate demand on taxpayers’ resources. For employers in particular, tax costs remain a significant consideration in decisions about recruitment, remuneration and investment.
A £59 billion gap – and a mandate to close it
Alongside rising revenues, closing the tax gap remains a central HMRC priority. The latest provisional estimate puts the difference between tax theoretically due and tax collected at £59.2bn, or 6.4% of theoretical liabilities.(2)
The estimated gap varies considerably across taxes:
Corporation Tax and the combined Income Tax, National Insurance and Capital Gains Tax category each account for approximately 35% of the overall gap, followed by VAT at 20%. Small businesses account for 62% of the gap by customer group, reinforcing the importance of compliance activity across the business population.
HMRC generated £50.2bn of compliance yield in 2025/26, its measure of revenue secured or protected through intervention, and reported an average return of £22 for every £1 spent on its compliance workforce. Government investment and associated measures are intended to deliver a further £10bn annually by 2029/30. Against that backdrop, individuals and businesses should expect HMRC scrutiny to remain a regular feature of their affairs and ensure that tax compliance is increasingly embedded in everyday commercial decision-making.
More officers. Broader scrutiny.
HMRC’s enforcement ambitions are supported by an expanding workforce. More than 1,600 additional compliance officers joined HMRC during 2025/26, taking the increase since Autumn Budget 2024 to over 2,100, against a target of 5,500 additional frontline officers by 2030.
That investment has not yet translated into a year-on-year increase in the number of checks: HMRC carried out 306,000 compliance checks in 2025/26, 10,000 fewer than the previous year. Nevertheless, HMRC’s recruitment programme and focus on higher returns from intervention point towards sustained, increasingly targeted scrutiny of taxpayers’ affairs for the foreseeable future.
The breadth of that scrutiny is significant. HMRC reports actively investigating around half of the UK’s largest businesses at any one time. Its priorities also include offshore non-compliance, promoters of avoidance, VAT and PAYE repayment fraud, and illegal activity involving cash‑intensive businesses. At the more serious end, HMRC opened 494 new criminal investigations – an increase of 10.8% on the previous year.
Cryptoassets are also becoming more visible to HMRC. Following implementation of the Cryptoasset Reporting Framework in January 2026, UK cryptoasset service providers must collect specified information about users and transactions for annual reporting. Together with international information exchange, this will strengthen HMRC’s ability to identify discrepancies between cryptoasset activity and taxpayers’ reported positions.
Debt collection moves up the agenda
HMRC’s focus extends beyond establishing liabilities to recovering them. Its outstanding tax debt balance reached £44.7bn at March 2026, which HMRC attributes to rising liabilities and wider financial pressures on taxpayers. It resolved almost £102bn of debt during the year, approximately 82% through payment, with the remainder resolved through other routes, including losses.
HMRC recruited 540 additional debt management staff during 2025/26 and is expanding its use of private debt collection agencies, automation and data-led interventions. HMRC expects its investments in this area to help it collect over £12 billion more debt by 2030/31.
For businesses and individuals facing cash-flow difficulties, the practical consequences can be immediate. Tax arrears can intensify financial pressure and lead to escalating recovery action. Businesses should engage with HMRC early, establish whether the debt is properly due and develop a realistic strategy for payment or challenge to protect business continuity. Individuals should likewise review their tax position, consider what they can afford to pay and engage with HMRC as soon as possible to explore their options.
Smarter tools. Greater visibility.
HMRC’s compliance capability is becoming more sophisticated. It reports that AI and advanced analytics supported the protection and recovery of £10bn in tax during 2025/26. These tools, together with HMRC’s “Connect” system, help identify potential inaccuracies, target interventions and analyse large volumes of documents in complex investigations.
The information available to HMRC is also expanding. During 2025/26, it received Common Reporting Standard information on more than 11 million financial accounts from 104 jurisdictions, which it compares with taxpayer records and other intelligence. Cryptoasset reporting and closer information sharing with Companies House and the Insolvency Service will further increase that visibility. HMRC’s Strengthened Reward Scheme also offers eligible informants discretionary rewards of between 15% and 30% of the tax collected where their information leads to recoveries of at least £1.5m. These substantial financial incentives may encourage more informants to come forward, increasing the volume of information available to HMRC and the prospect of enquiries and investigations.
For taxpayers, this reinforces the importance of consistency between tax returns, underlying records and information held by third parties. Where HMRC initiates a check or a dispute arises, a clear, evidence-based response to HMRC is essential: discrepancies identified through data analysis may warrant investigation, but their significance depends on the facts and the applicable law. Where errors are identified, taxpayers should consider making a voluntary disclosure to HMRC, which may help mitigate penalties and limit further interest accruing by facilitating earlier payment. Understanding and addressing these issues early can also help keep enquiries focused, contain costs and bring disputes to an efficient conclusion.
(1) Figures are drawn from HMRC’s annual report and accounts 2025 to 2026.
(2) Figures taken from HMRC's "Measuring tax gaps 2026 edition: tax gap estimates for 2024 to 2025".