How HMRC have more than doubled their compliance yield.
The National Audit Office’s May 2025 report delves into the complexities of HMRC’s interaction with wealthy individuals in the UK, providing a granular, data-driven analysis of tax compliance within this significant segment of the population.
HMRC defines wealthy individuals as those with either an annual income exceeding £200,000 or assets of at least £2m in any of the preceding three years. This population (which has risen to approximately 850,000 individuals in 2023/24) represents a small percentage of the total taxpayer base but contributes substantially to the UK’s tax revenue, generating £119bn in 2023/24 – 25% of total personal tax receipts. The responsibility for managing the tax affairs of this group falls to HMRC’s dedicated Wealthy team – around 910 full-time equivalent staff.
Despite their significant contribution to tax revenue, the wealthy population is identified as the lowest contributing group to the tax gap, with an estimated shortfall of £1.9bn for 2022/23. The NAO report, however, acknowledges that this figure is likely an underestimate due to inherent methodological limitations in accurately quantifying tax avoidance and evasion within this complex demographic.
The report details the Wealthy team’s compliance activities, which are primarily driven by risk assessments based on the complexity of a taxpayer’s affairs. While this approach is intended to target high-risk individuals, the NAO suggests that the proportionality between wealth and the level of scrutiny isn’t always consistent. Nevertheless, the compliance yield from wealthy individuals has shown significant growth, more than doubling from £2.2bn in 2019/20 to £5.2bn in 2023/24. This increase, however, is partially attributed to activities outside the Wealthy team’s direct purview, with £3.8bn of the total yield originating from other HMRC departments.
This substantial increase in the compliance yield is largely attributable to a shift towards higher-value investigations. This targeted approach has resulted in a substantial increase in the average yield per closed investigation, rising from £34,106 in 2018/19 to £93,800 in 2023/24. However, a significant proportion (46%) of investigations in 2023/24 resulted in no additional tax revenue, highlighting the inherent challenges in pursuing complex cases involving wealthy individuals. Furthermore, investigations yielding more than £100,000 took an average of 40 months to conclude.
Offshore holdings are identified as a significant compliance risk area. At the end of 2019, UK residents held £849bn in offshore accounts across 93 tax jurisdictions then exchanging data with the UK.
HMRC’s proactive approach, focusing on upstream compliance activities, has yielded positive results. Upstream activities, such as targeted communications and educational initiatives, accounted for 46% of the compliance yield in 2023/24, a substantial increase from 6% in 2018/19. Conversely, downstream interventions, such as pre-filing conversations, had a lower uptake at only 3% in 2023/24. HMRC’s ‘one to many’ approach, involving targeted letters to groups of taxpayers with particular compliance risks, generated £148m in compliance yield in the three years to 2023/24.
Despite these advancements, the report concludes that further development is needed in areas such as setting clear timelines, developing detailed recruitment strategies and rigorously evaluating the effectiveness of current approaches. A more comprehensive implementation plan, with clearly defined goals and regular performance reviews, would significantly strengthen HMRC’s efforts.
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HMRC’s approach to wealthy individuals
How HMRC have more than doubled their compliance yield.
The National Audit Office’s May 2025 report delves into the complexities of HMRC’s interaction with wealthy individuals in the UK, providing a granular, data-driven analysis of tax compliance within this significant segment of the population.
HMRC defines wealthy individuals as those with either an annual income exceeding £200,000 or assets of at least £2m in any of the preceding three years. This population (which has risen to approximately 850,000 individuals in 2023/24) represents a small percentage of the total taxpayer base but contributes substantially to the UK’s tax revenue, generating £119bn in 2023/24 – 25% of total personal tax receipts. The responsibility for managing the tax affairs of this group falls to HMRC’s dedicated Wealthy team – around 910 full-time equivalent staff.
Despite their significant contribution to tax revenue, the wealthy population is identified as the lowest contributing group to the tax gap, with an estimated shortfall of £1.9bn for 2022/23. The NAO report, however, acknowledges that this figure is likely an underestimate due to inherent methodological limitations in accurately quantifying tax avoidance and evasion within this complex demographic.
The report details the Wealthy team’s compliance activities, which are primarily driven by risk assessments based on the complexity of a taxpayer’s affairs. While this approach is intended to target high-risk individuals, the NAO suggests that the proportionality between wealth and the level of scrutiny isn’t always consistent. Nevertheless, the compliance yield from wealthy individuals has shown significant growth, more than doubling from £2.2bn in 2019/20 to £5.2bn in 2023/24. This increase, however, is partially attributed to activities outside the Wealthy team’s direct purview, with £3.8bn of the total yield originating from other HMRC departments.
This substantial increase in the compliance yield is largely attributable to a shift towards higher-value investigations. This targeted approach has resulted in a substantial increase in the average yield per closed investigation, rising from £34,106 in 2018/19 to £93,800 in 2023/24. However, a significant proportion (46%) of investigations in 2023/24 resulted in no additional tax revenue, highlighting the inherent challenges in pursuing complex cases involving wealthy individuals. Furthermore, investigations yielding more than £100,000 took an average of 40 months to conclude.
Offshore holdings are identified as a significant compliance risk area. At the end of 2019, UK residents held £849bn in offshore accounts across 93 tax jurisdictions then exchanging data with the UK.
HMRC’s proactive approach, focusing on upstream compliance activities, has yielded positive results. Upstream activities, such as targeted communications and educational initiatives, accounted for 46% of the compliance yield in 2023/24, a substantial increase from 6% in 2018/19. Conversely, downstream interventions, such as pre-filing conversations, had a lower uptake at only 3% in 2023/24. HMRC’s ‘one to many’ approach, involving targeted letters to groups of taxpayers with particular compliance risks, generated £148m in compliance yield in the three years to 2023/24.
Despite these advancements, the report concludes that further development is needed in areas such as setting clear timelines, developing detailed recruitment strategies and rigorously evaluating the effectiveness of current approaches. A more comprehensive implementation plan, with clearly defined goals and regular performance reviews, would significantly strengthen HMRC’s efforts.
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