- Wealthy individuals’ complex tax affairs make it more difficult for HMRC to identify the tax they owe and present more opportunities to deliberately not pay the correct amount of tax due
- HMRC has greatly increased the additional tax revenue collected from wealthy individuals by tackling non-compliance, however the scale of success suggests non-compliance among the wealthy could be much higher than it previously thought
- The NAO recommends HMRC should consider how it can provide the public with greater transparency about the amount of tax that wealthy individuals pay
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.
"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."
Gareth Davies, head of the NAO
Read the full report
Collecting the right tax from wealthy individuals
Notes for editors
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.