HMRC faces £43.8 billion in outstanding tax debt

HM Revenue and Customs (HMRC) is managing £43.8 billion in outstanding tax debt at the end of the 2025-26 financial year, according to a report by the National Audit Office (NAO). While the debt represents 4.7% of total tax receipts—an improvement from 5.6% in 2022-23—the total remains significantly higher than the pre-pandemic average of approximately £15 billion.

The NAO warned that the age of the debt is increasing, making it more difficult to recover. At the end of the 2025-26 period, 51% of the tax debt was more than a year old, compared to 28% in 2019-20. HMRC estimates that roughly 46% of the current debt balance may never be paid.

To combat these challenges, HMRC has implemented measures since 2021, including hiring more staff, utilizing private debt collection agencies, and using data to tailor collection approaches. These efforts are estimated to have generated £10.7 billion in additional revenue against a cost of £368 million. The report attributes the rise in new debt to pandemic-related pressures, the cost-of-living crisis, and wider economic shocks.