The tax gap
The tax gap is the difference between the amount of tax that should, in theory, be paid and the amount actually collected, covering everything from innocent error to deliberate fraud. HMRC's 2023-24 estimate is £46.8bn, or 5.3% of total tax liabilities, the highest ever in cash terms. Small businesses account for about 60% of that gap, roughly £28bn, but mostly through error and failure to take reasonable care rather than deliberate avoidance. Australia's overall tax gap for 2022-23 was A$58.2bn, or 9.1%. The US IRS projects a gross tax gap of about US$696bn for tax year 2022, about US$606bn after late payments and enforcement (the net gap). The tax gap is a composite measure and should not be read as a measure of corporate tax avoidance on its own.
ByLoopholeKiln EditorialPublished
Figures current as of·Corrections
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Example: the UK's £46.8bn gap rolls together VAT underpaid by sole traders, PAYE errors by small employers, income tax left off self-employed returns and corporation tax avoided by large groups.
Why it matters to a small business: small firms bear a large share of the enforcement effort because they make up 60% of the gap, often over honest mistakes. Large-company avoidance is harder to quantify and to enforce, so you can face more scrutiny over smaller sums.