The Public Accounts Committee (PAC) has published 'Collecting the right tax from wealthy individuals', revealing that HMRC cannot identify how much tax is paid by UK billionaires. The PAC was also sceptical of HMRC's estimate that the wealthy tax gap was only £1.9 billion.
The report praised HMRC’s additional £5.2 billion of tax revenue in 2023–24 from the wealthy, but quickly added that the scale of this success suggests either non-compliance among the wealthy has got worse, or that previous estimates of the extent to which they were avoiding tax were too low.
Reflecting an earlier National Audit Office report, the PAC again expressed scepticism at HMRC's 2022-23 estimate of the wealthy's tax gap being £1.9 billion. Similarly, it queried the estimate of offshore tax evasion, at £0.3 billion, as "implausibly low" given the £849 billion held by UK residents in offshore bank accounts in 2019.
'Wealthy' is officially defined as those with an income of £200,000 or assets of at least £2 million in any of the last three years, but the PAC argued that this was too loose a profile. It pointed out that a billionaire has wealth and assets 500 times greater than a wealthy individual who only just meets HMRC’s threshold.
As a result, they have a huge potential to affect the tax gap.
There was also criticism of HMRC's legal pursuit of wealthy taxpayers. The complex, high-value cases went on for too long and 46% of them in 2023–24 closed with no yield. There were only 25 prosecutions and HMRC’s aim to increase the number of people charged with criminal offences by 20% is underwhelming given that, in the wealthy population, this equates to just five more taxpayers charged annually.
Conclusions and recommendations
Conclusion One
HMRC had done well to increase compliance yield from wealthy individuals, but there are significant opportunities to collect more revenue and close the tax gap.
- The yield from HMRC’s compliance work with wealthy individuals has more than doubled in recent years, collecting £5.2 billion in 2023–24, up from £2.2 billion in 2019–20.
- HMRC have identified opportunities relating to data exchange, targeting and collaborating globally with other tax jurisdictions to close the tax gap.
- There are currently around 1,000 people in the wealthy team and HMRC have secured funding for another 400 staff.
- HMRC aim to secure at least an additional £500m of yield from its work tackling wealthy offshore risks by 2029–30.
Recommendation
HMRC should publish a plan for increasing yield from wealthy taxpayers, domestically and offshore, and set out timelines for achieving its objectives.
Conclusion Two
Even among the 'wealthy', there are vast disparities in wealth and circumstance, making it likely that more tax is at risk for the wealthiest taxpayers.
- The population of taxpayers that HMRC’s wealthy team administers is getting bigger, up from 700,000 individuals in 2019–20 to 850,000 individuals in 2023–24.
- HMRC treat wealthy individuals as one single group. Its risk assessment process does not segment individuals according to levels of wealth.
- HMRC say it finds some billionaires have quite straightforward tax planning, while some millionaires with much lower wealth will have set up very complex offshore trusts and structures.
- The PAC noted that the value of tax associated with a billionaire could be a hundred times greater than a high net worth individual (assets of £10 million or more).
Recommendation
As part of its plan for increasing the yield from wealthy taxpayers domestically and offshore, HMRC should review whether segmenting the wealthy customer group according to different levels of wealth and complexity would help it to assess and then target the most significant risks. As part of its consideration, HMRC should estimate the value of tax at risk within the wealthy taxpayer base and write to the PAC with the results.
Conclusion Three
HMRC cannot identify how much tax is paid by UK billionaires, despite the relatively small number of individuals and significant sums of money involved.
- Despite HMRC having access to a wide range of internal and external data to identify wealthy individuals, the PAC was disappointed that HMRC do not use these data to provide transparency.
- HMRC argue that income and chargeable gains determine whether you pay tax, not whether you are a billionaire.
- A billionaire has wealth and assets 500 times greater than a wealthy individual who just meets HMRC’s threshold and so has huge potential on their own to affect the tax gap.
- In the United States, the Inland Revenue Service has worked with researchers to link its data to the Forbes 400. HMRC has not facilitated a similar analysis with the Sunday Times Rich List.
Recommendation
Alongside its Treasury Minute response, HMRC should write to the Committee with their plans for improving its understanding of the wealth and assets held by the wealthiest individuals, including billionaires. This should include:
- Work HMRC can implement straightaway by comparing available data on known billionaires, such as the Sunday Times Rich List, with its own records.
- The steps HMRC will take to request more data on assets and wealth from those taxpayers it suspects have high or very high levels of wealth
- Work HMRC will undertake, and associated timeframes, to better understand the links between personal wealth and connected entities, including complex trusts and structures.
Conclusion Four
HMRC can do to improve their risk assessments and targeting of wealthy people, in particular, through the use of data and technology and recruiting wealth management experts.
- HMRC say targeting its resources on more complex, higher-risk, higher-yield cases has resulted in higher average returns, increasing from £34,000 to £94,000 per case in the wealthy team.
- But the wealthy team closed 46% of its investigations with no yield at all in 2023–24.
Recommendation
Alongside their Treasury Minute response, HMRC should write to the Committee to explain how confirmed funding to date will feed through to better compliance performance and what it expects to achieve from future investment.
- This explanation should go beyond just the impact on compliance yield and should cover the expected impact on other performance measures, such as the proportion of cases that result in a positive return.
- HMRC should include further details of its plans to invest in new IT and the correct skills to undertake the data analysis necessary to risk assess and target wealthy people.
Conclusion Five
Too many compliance investigations last too long, with too few leading to penalties and prosecutions.
- The average time to close a tax investigation increased every year between 2018–19 to 2022–23.
- For investigations yielding more than £100,000, the average duration in 2023–24 was 40 months.
- In 2023–24, there were only 25 criminal prosecutions of wealthy individuals
- In 2023–24, there were only 456 penalties, down from 1,747 penalties in 2022–23.
- HMRC has issued no penalties to enablers of tax evasion, despite acknowledging unscrupulous advisers often play a key role in helping the wealthy evade tax.
- We are also unconvinced that HMRC fully utilises the deterrent effect of publicising successful prosecutions, despite acknowledging the value of publicising high-value, high-profile cases.
Recommendation
HMRC should assess whether they are using available powers effectively in tackling non-compliance by the wealthy, in particular, sanctions.
- HMRC should report to the Committee as to why they have not issued any penalties to enablers of tax evasion, and how they plan to start using them as an effective sanction and deterrent.
- HMRC should consider setting an annual target for penalties issued.
- HMRC should also show more ambition for the number of prosecutions of wealthy individuals evading tax.
Conclusion Six
It is not sufficiently clear how much tax is paid and how much tax is avoided by the very wealthy, which restricts HMRC’s ability to reassure the public that it administers the system fairly.
- HMRC also needs to improve its assessment of the amount of tax that the wealthy avoid paying.
- Given HMRC's deficiencies in information on wealth, the PAC was concerned that HMRC's estimate that the wealthy tax gap is only £1.9 billion is overly confident and optimistic.
Recommendation
HMRC should consider how best to expand the range of information it publishes on wealthy individuals to give people greater confidence that these taxpayers pay their fair share.
- HMRC should set out statistics on the amount of tax paid by wealthy individuals in relation to top-down estimates of levels of wealth and chargeable gains.
- HMRC should report this for the wealthy population as a whole and, as far as possible, for different levels of wealth.
Useful guides on this topic
Self Assessment Return 2024/25: What's new?
2025 Self Assessment toolkit: top tips for completing tax returns for the year ending 5 April 2025.
Tax Planning for the 2024/25 year-end: Private Clients
This is our 2024-25 year-end and new tax year checklist and toolkit for private clients.
Capital taxes round-up: 2024-25
A round-up of developments in capital taxes for individuals for 2024-25 including some topical Capital Gains Tax (CGT) and Inheritance Tax (IHT) cases.
External links
Committee of Public Accounts: Collecting the right tax from wealthy individuals