Impressive progress, but there are challenges ahead.
The recently-released HMRC annual report and accounts: 2025 to 2026 contained a wealth of information for HMRC, the tax profession and anyone with an interest in HMRC’s performance to consider. One year on from the publication of the Tax Transformation Roadmap, the annual report maps HMRC’s progress against the governmental priorities committed to in the roadmap, including:
closing the tax gap;
improving HMRC’s day-to-day performance;
reform and modernisation of the UK’s tax and customs system.
Closing the tax gap: To help close the tax gap, HMRC recruited 1,600 new compliance officers in 2025/26 and are currently ahead of their plan to recruit 5,500 additional compliance officers by 2030. This recruitment drive was supported by a new Tax, Customs and Compliance Academy, which offers training to drive a more consistent delivery of HMRC’s professional standards.
Turning to compliance activity, tax under consideration – the maximum potential additional tax liability in cases under enquiry – in the Large Business Directorate increased from £52.6bn to £73.8bn, with tax under consideration in international enquiries almost doubling to £26.7bn in 2025/26. This corroborates the authors’ experience of more, and more cross-border, enquiries in Large Business customers.
Meanwhile, the Wealthy population (those with incomes over £200,000 or assets of £2m or more in the last three years) increased from 950k to 1.3m, with a correspondingly significant increase in the Wealthy tax gap from £2.1bn to £3.6bn. The Wealthy population is a key focus area for HMRC.
HMRC will also be pleased at the deterrent effect arising from their litigation successes, which HMRC estimates raised an additional £8.2bn of tax in 2025/26.
Debt collection was another priority. Around £102bn of debt was resolved in 2025/26, an increase of 5.3% from 2024/25 that also saw debt as a percentage of overall tax receipts dip below the 5% mark.
While HMRC’s report includes many success stories, the computation of the overall tax gap has now increased from 6.0% in 2023/24 to a provisional estimate of 6.4% in 2024/25.
Improving customer service: HMRC’s plan for improved performance is closely tied to their modernisation programme and ambition to become a ‘digital first’ organisation. The annual report states HMRC are on target for at least 90% of all interactions with customers and intermediaries to take place digitally by 2030, driven predominantly by the HMRC app which was used by 7.6m people in the year, with a 64% increase in January self-assessment payments made through the app compared to the previous year. Call waiting times dropped sharply and the number of adviser attempts handled was up nearly 15% on the previous year. That said, the report also acknowledges that there is further to go in reducing challenges in dealing with HMRC.
Reform and modernisation: As part of the digital-first focus, HMRC has identified use cases where AI can drive tax collection, with the Annual Report noting that AI-enabled analytics protected the recovery of £10bn of tax in 2025/26 through improved targeting of compliance activity and supporting analysis of large volumes of documents. HMRC also appointed their first ever Chief AI Officer in April 2026 to lead further developments.
What next? Undoubtedly, HMRC’s clear strategy has resulted in impressive progress in a short space of time against the Tax Transformation Roadmap. However, challenges remain. Firstly, more than 60% of the tax gap derived from small businesses. MTD is a key aspect of HMRC’s plan to close the tax gap in this area, and HMRC will be keen to see how the numbers change now that MTD for Income Tax has begun. Secondly, around 42% of the tax collected was attributed to upstream/preventative actions, which can be hard to quantify and may attract challenge in future annual reports.
Impressive progress, but there are challenges ahead.
The recently-released HMRC annual report and accounts: 2025 to 2026 contained a wealth of information for HMRC, the tax profession and anyone with an interest in HMRC’s performance to consider. One year on from the publication of the Tax Transformation Roadmap, the annual report maps HMRC’s progress against the governmental priorities committed to in the roadmap, including:
closing the tax gap;
improving HMRC’s day-to-day performance;
reform and modernisation of the UK’s tax and customs system.
Closing the tax gap: To help close the tax gap, HMRC recruited 1,600 new compliance officers in 2025/26 and are currently ahead of their plan to recruit 5,500 additional compliance officers by 2030. This recruitment drive was supported by a new Tax, Customs and Compliance Academy, which offers training to drive a more consistent delivery of HMRC’s professional standards.
Turning to compliance activity, tax under consideration – the maximum potential additional tax liability in cases under enquiry – in the Large Business Directorate increased from £52.6bn to £73.8bn, with tax under consideration in international enquiries almost doubling to £26.7bn in 2025/26. This corroborates the authors’ experience of more, and more cross-border, enquiries in Large Business customers.
Meanwhile, the Wealthy population (those with incomes over £200,000 or assets of £2m or more in the last three years) increased from 950k to 1.3m, with a correspondingly significant increase in the Wealthy tax gap from £2.1bn to £3.6bn. The Wealthy population is a key focus area for HMRC.
HMRC will also be pleased at the deterrent effect arising from their litigation successes, which HMRC estimates raised an additional £8.2bn of tax in 2025/26.
Debt collection was another priority. Around £102bn of debt was resolved in 2025/26, an increase of 5.3% from 2024/25 that also saw debt as a percentage of overall tax receipts dip below the 5% mark.
While HMRC’s report includes many success stories, the computation of the overall tax gap has now increased from 6.0% in 2023/24 to a provisional estimate of 6.4% in 2024/25.
Improving customer service: HMRC’s plan for improved performance is closely tied to their modernisation programme and ambition to become a ‘digital first’ organisation. The annual report states HMRC are on target for at least 90% of all interactions with customers and intermediaries to take place digitally by 2030, driven predominantly by the HMRC app which was used by 7.6m people in the year, with a 64% increase in January self-assessment payments made through the app compared to the previous year. Call waiting times dropped sharply and the number of adviser attempts handled was up nearly 15% on the previous year. That said, the report also acknowledges that there is further to go in reducing challenges in dealing with HMRC.
Reform and modernisation: As part of the digital-first focus, HMRC has identified use cases where AI can drive tax collection, with the Annual Report noting that AI-enabled analytics protected the recovery of £10bn of tax in 2025/26 through improved targeting of compliance activity and supporting analysis of large volumes of documents. HMRC also appointed their first ever Chief AI Officer in April 2026 to lead further developments.
What next? Undoubtedly, HMRC’s clear strategy has resulted in impressive progress in a short space of time against the Tax Transformation Roadmap. However, challenges remain. Firstly, more than 60% of the tax gap derived from small businesses. MTD is a key aspect of HMRC’s plan to close the tax gap in this area, and HMRC will be keen to see how the numbers change now that MTD for Income Tax has begun. Secondly, around 42% of the tax collected was attributed to upstream/preventative actions, which can be hard to quantify and may attract challenge in future annual reports.
