HMRC’s latest figures, published in June 2026, show the UK’s “tax gap”, the difference between what should be collected and what actually has been collected, has risen to 6.4%, up from 5.3% the year before.
That’s a £59.2 billion shortfall, even though HMRC still collected 93.6% of everything owed.
This rising deficit means small businesses will face unprecedented scrutiny, stricter enforcement, and more frequent audits from HMRC.
The HMRC Tax Gap and its impact on small businesses
Small businesses account for a large share of the tax gap, and Corporation Tax is a big part of it, as the Corporation Tax gap alone is rising to 18.1%.
Before that sounds alarming, it’s worth being clear about what this figure captures and represents.
HMRC’s tax gap measures a mix of things, including:
- genuine mistakes
- a misunderstanding of complex rules
- cash flow problems leading to late or missed payments
- deliberate non-compliance (though this is a smaller portion of that gap).
It’s not a claim that most small businesses are doing anything wrong on purpose.
What this growth in the tax gap means
Recent changes suggest that HMRC is tightening up. We’ve already covered an example of this recently, Corporation Tax late filing penalties doubling.
With that in mind, we’d encourage you to expect more of this kind of activity as HMRC works to close the tax gap, not less.
This could include:
- More auditing
- Advanced technology checks to flag anomalies (which could include AI integration)
- Tougher penalties
- Making Tax Digital and a push for digital reporting (We created this blog post explaining more on this)
How to stay comfortably on the right side of HMRC
The businesses that end up on HMRC’s radar are usually the ones with messy or late records, not the ones asking questions early.
To stay away from HMRC’s radar and the effects of this tax gap, keep up to date. This means having up-to-date books, filing on time, and flagging anything you’re genuinely unsure about rather than guessing. That way, the above activities from HMRC aren’t likely to impact you directly and keep you out of scrutiny altogether.
What are the next steps?
You don’t need to do anything differently today because of this report. It is however a useful reminder of why staying organised and on top of deadlines matters more than ever.
HMRC’s tolerance for real mistakes hasn’t disappeared, but its patience for late or incomplete filing is visibly shrinking.
Get a second pair of eyes on your financial records
Are you looking for support to make sure everything is in good shape, and not a concern for HMRC in light of this increase to the tax gap?
At Tax Driven Accountants, we handle everything from bookkeeping to VAT and Self Assessments. Our trusted team of accountants based across the UK offer support, guidance and an extra pair of eyes exactly when you need them.
Get in touch with us today to find out more. Call us on 0800 999 1800, or send us an enquiry via our website.
We’re happy to take a look.
