HM Revenue & Customs (HMRC) estimates that around 90% of taxpayers meet their tax responsibilities in full and on time. When amounts owed to HMRC become overdue for payment, they become a debt.
At the end of 2024-25, the amount of tax debt owed to HMRC totalled £42.8 billion, which is 5% of total tax receipts. This compares with the five years leading up to the COVID-19 pandemic between 2015-16 and 2019-20, when the tax debt balance was, on average, around £15 billion, or 2.5% of tax receipts. HMRC aims to reduce the debt balance as a percentage of receipts year on year. In 2024-25 it reduced it by 0.2 percentage points.
In November 2021, we reported on how HMRC managed tax debt through the pandemic. Since then, HMRC published a tax debt strategy in October 2023 and an update in November 2025. It has four pillars that guide its strategic approach:
- preventing tax debt
- tailoring interventions
- effective and efficient resolution of tax debt
- being adaptable
HMRC aims to make it easy for those who can pay, support those who need help and take firm action against those who choose not to engage. With funding announced as part of Spending Review 2025, HMRC is retaining and recruiting 2,400 tax debt officers, including 1,200 existing HMRC staff whose roles have been extended.
Scope
This report will examine whether HMRC is well-placed to reduce the tax debt balance in line with its strategic ambition while managing the flow of new tax debt. It will examine whether HMRC:
- understands the trends in and drivers of the current tax debt balance and has a clear strategy in place to reduce it
- effectively adapts its debt management approach to different types of debtors
- makes efficient and effective use of its debt management resources
NAO team
Director: Louise Bladen
Audit Manager: Andy Serlin