Published in June 2025, the latest figures from HMRC estimate that 5.3% of taxes are going unpaid, with the tax gap now approaching £46.8 billion for the 2023–2024 tax year.
This is an increase of 0.5% and £7 billion compared to the previous figures for the 2022–2023 tax year, but as was the case before, small businesses are the worst tax offenders.
Small businesses continue to be responsible for 60% of the total missing taxes, with the Corporation Tax gap increasing from 6.4% in 2011–2012 to almost 16% in 2023–2024.
Meanwhile, the tax gap for wealthy individuals remains consistent at just 5%.
So, what does this mean for smaller businesses, and how can our Barnsley accountants help?
Why are small companies not paying tax?
It’s perhaps unsurprising that small company owners are deliberately taking steps to limit their tax liability. Not only are businesses facing higher Corporation Tax rates, but it’s also becoming increasingly difficult for business owners to extract profits.
Therefore, business owners may be using cash payments or payments in kind to avoid declaring income or claiming non-work expenditure to exploit expensing rules.
For example, owners could claim deductions for purchasing equipment like laptops, phones, or tablets that may not even be used for business purposes.
Some may even use tools to engage in electronic sales suppression, which is tax fraud.
While HMRC hasn’t had the resources for extensive tax investigations into all of these activities, this could change with the Chancellor’s new funding allocations.
High non-compliance for crypto assets
Tax non-compliance is also believed to be quite high for crypto assets, as HMRC has been struggling to keep up with this rapidly evolving sector over the years.
While HMRC may be able to identify when crypto assets are converted into cash, it’s more complicated when one type of crypto token is exchanged for a different token type, or when crypto tokens are used as payment for goods or services.
For example, transactions such as converting Bitcoin to Ethereum or using a cryptocurrency debit card would be considered disposals for Capital Gains Tax purposes.
Is your business tax compliant?
With such a large tax gap, small businesses and crypto assets are definitely on HMRC’s radar.
So, if you’re the owner of a small company, it’s crucial to make sure you’re reporting the right financial information and paying the correct amount of tax to HMRC.
Mandatory switches to Making Tax Digital software should make it easier for businesses to accurately record and report their taxable income, but only if owners get ahead of deadlines.
Professionals like the team at gbac can help businesses of different sizes with everything from bookkeeping to tax management, so outsourcing could save you a lot of time and effort.
To learn how we can ensure your small company is tax compliant, call us on 01226 298 298, or send an email to info@gbac.co.uk and we’ll be in touch.