Tax debt falls marginally to £42.8bn but remains significantly above pre-pandemic levels
HMRC’s latest annual report, published this week, reveals that tax debt stood at £42.8bn as of 31 March 2025 (ignoring tax credit debt), representing a modest decrease of £0.2bn (0.5%) from the previous year’s £43.0bn.
However, this figure remains dramatically higher than pre-pandemic levels, when tax debt typically stood around £15bn or 2.5% of tax revenues and the reduction may simply be because HMRC has written off more irrecoverable debt than in past years.
Tax debt as a proportion of total revenues decreased slightly from 5.6% in 2023-24 to 4.9% in 2024-25, but this still represents nearly double the pre-pandemic rate. The economic impact of the pandemic and HMRC’s decision to suspend most debt collection during that period led to a substantial increase in outstanding tax debt that the tax authority has since struggled to get under control.
Key findings:
- Total tax debt: £42.8bn (down 0.5% from £43.0bn in 2023-24)
- Tax debt as proportion of revenues: 4.9% (down from 5.6% in 2023-24)
- Amount of debt written off increased from £5.6bn to £7.2bn year-on-year
- HMRC’s debt impairment estimate rose from £27.6bn to £30.2bn – so only 30% of the total – around £12.6bn may actually be collectable in practice
Commenting on the figures, Jon Claypole, head of tax dispute resolution at BDO said: “While any reduction in tax debt is welcome, £42.8bn represents an enormous sum that remains uncollected. The marginal improvement masks the fact that tax debt levels are still running at nearly twice the pre-pandemic rate.
“What’s particularly concerning is that HMRC has had to write off significantly more debt this year – £7.2bn compared to £5.6bn last year. This reflects the continuing high levels of corporate insolvencies and the aging nature of the debt portfolio.
“The chancellor will be eyeing this £42.8bn mountain of unpaid tax as a potential revenue source, especially given ongoing pressure on public finances. However, with HMRC’s own impairment estimates suggesting that £30.2bn may never be recovered, the realistic target for additional collections is likely to be nearer to £12.6bn.
“At the Autumn Budget 2024 and Spring Statement 2025, the government invested a further £630m in HMRC’s ability to recover debt designed to enable the tax authority to collect over £11bn more debt by the end of 2029 to 2030. HMRC will be hoping that this extra investment in 2,400 debt management staff will prove effective.
“HMRC needs to strike the right balance between supporting businesses and individuals in genuine financial difficulty through Time to Pay arrangements, while being more assertive with those who can afford to pay but choose not to. The current figures suggest there’s still significant room for improvement in debt collection effectiveness.
“The report shows that while HMRC’s compliance activities yielded £48.0bn in 2024-25, up 14.9% from the previous year, the persistent high level of outstanding debt indicates that collection challenges remain substantial.”