Britons Underpay £59.2 Billion in Tax for 2024/25, Mostly by Small Businesses
Tax Underpayment and Its Impact on the UK Economy
LONDON, June 23 (Reuters) - Britons paid £59.2 billion ($78 billion) less tax than they should have in the 2024/25 financial year, equivalent to 6.4% of the total, with most of the shortfall coming from small businesses, the country's tax office said on Tuesday.
Government Response and Fiscal Goals
Britain's government aims to reduce this shortfall by £10 billion by 2029/30, but past progress has been slow and the overall underpayment rate has fallen by just 1 percentage point over the past 20 years.
Britain ran a budget deficit of £128 billion or 4.2% of gross domestic product last financial year, and finance minister Rachel Reeves has only £24 billion of leeway to hit a goal of balancing day-to-day spending with tax revenue by 2029/30.
Fraud and Error in the Welfare System
Trends in Welfare Overpayments
Separate figures from the government's Office for Budget Responsibility showed fraud and error in the welfare system, including pensions, dropped to 3.2% in 2025/26, down from a peak of 4.3% in 2021/22 during the COVID-19 pandemic.
Overall overpayments were estimated at £10.3 billion in 2025-26, of which £7.4 billion was for universal credit, a benefit paid to people who are unemployed or on low incomes.
Universal Credit Claims and Fraud
More than a quarter of new universal credit claims during the COVID-19 pandemic were wrong, but the rate of fraud and error for universal credit has now been reduced to pre-COVID-19 of just under 10%, the OBR said.
Britain's Department for Work and Pensions said 81% of universal credit overpayments last year were due to suspected fraud by claimants, while 10% was due to claimants' inadvertent errors and 9% was a result of errors by officials.
Causes of Tax Underpayment
The tax office estimated 35% of tax underpayments were due to carelessness or negligence by taxpayers, 16% was due to error and 12% down to tax evasion.
Corporation tax and value-added tax were the most common taxes that were not paid, it added.
($1 = 0.7567 pounds)
(Reporting by David Milliken, editing by Andy Bruce)