Unpaid tax owed to HMRC stood at £43.8bn in March, almost three times its pre-pandemic level. HMRC expects nearly half may never be collected, and Wednesday’s Budget could change how it chases the rest.
Some 8.2 million taxpayers owed HMRC £43.8bn at the end of March 2026, across 36 million separate debts. The National Audit Office published the figures on 23 October. The debt equals 4.7% of the £938.8bn HMRC collected in 2025-26.
Before the pandemic, tax debt typically sat at about £15bn, or 2.5% of receipts. It peaked at 9.3% at the end of 2020-21 and has fallen since. Even so, more than one in six of the UK’s roughly 46 million taxpayers is in debt to HMRC at any time.
That leaves about £29bn more tax outstanding than before Covid, and HMRC doesn’t expect a return to the old level before 2030-31. Ahead of Wednesday’s Budget, it wants new powers to take money for smaller debts directly from bank accounts.
Where the debt comes from
Taxpayers ran up £103.6bn of new tax debt in 2025-26, across 22.2 million debts. Before the pandemic, the annual average was £51.8bn. Most of it clears fast, with nearly half of new debts resolved within a month.
Missed payment deadlines account for more than 80% of new debt by value. The NAO points to forgotten payments and short-term cash-flow problems as the main drivers. Yet a small number of large debts carry most of the money. About 60% of new debts are under £500 and make up just 2% of the money. The 1% above £50,000 make up more than 60%.
During the pandemic, new debt reached 20% of receipts in 2020-21, when HMRC paused collection. After Russia invaded Ukraine, it hit 15% in 2022-23, and the cost-of-living crisis has since squeezed taxpayers’ ability to pay.
A gap in what HMRC knows
HMRC can’t give a full split of the total between people and firms. According to the full NAO report, it lacks a complete breakdown of debtors into individuals and businesses. Neither the NAO nor HMRC’s annual report publishes the debt by type of tax.
The nearest guide is HMRC’s separate estimate of the tax gap, all the tax that should be paid but isn’t. That came to £59.2bn in 2024-25, and small businesses accounted for 62% of it.
HMRC wrote off or remitted £12.9bn in 2025-26, and write-offs made up three-quarters of that. Most followed company liquidations and personal bankruptcies. Company insolvencies were 39% higher than in 2019-20.
About 51% of the balance is now more than a year old, against 28% in 2019-20. HMRC collects an estimated 81.5% of debt less than a year overdue but just 15% of debt more than two years overdue. It puts £20.2bn of the balance at risk of never being paid.
Meanwhile, 690,000 taxpayers are repaying £6.5bn through formal payment plans. The average plan now runs for 16 months and covers £19,000, against seven months and £9,000 in 2019-20.
What £43.8bn compares with
The government borrowed £134.2bn in 2025-26, so the outstanding tax debt equals about a third of a year’s deficit. Between April and September 2026, borrowing reached £97.8bn, £6.0bn more than the Office for Budget Responsibility forecast.
Set against departmental budgets for 2025-26, the debt is worth about 70% of the Ministry of Defence’s £62.0bn. It’s more than twice the Home Office’s £19.6bn and equals 45% of the £96.9bn the government spent on debt interest.
Collecting the debt would help the public finances once rather than every year, because it’s a stock of money owed. HMRC also won’t get all of it. Even the £23.6bn it doesn’t consider at risk would still cover the Home Office for more than a year. Last year’s losses of £12.9bn alone came to two-thirds of that department’s budget.
A power to take instalments from bank accounts
HMRC has been able to take lump sums directly from bank accounts since 2015, for debts over £1,000. The rules leave at least £5,000 in the account. It used the power 19 times between 2015 and 2018, recovering £361,678.
In June, HMRC consulted on a new route for people who persistently ignore it. HMRC would take monthly instalments from their accounts after a notice period of around 14 days. The plan targets debts of up to about £5,000 for individuals and £10,000 for companies. Repayments could be capped at half of disposable income. It sets no protected minimum balance, and the Low Incomes Tax Reform Group has called for one. It argued that “lower-value debts should not attract a lower standard of procedural protection”.
HMRC’s existing debt measures have produced an estimated £10.7bn since 2021, at a cost of £368m. It expects the debt to fall to between 2.9% and 4.2% of receipts by 2029-30. A return to the pre-pandemic level of 2.5% comes no earlier than 2030-31. The NAO expects the consultation’s outcome in the Autumn Budget, which Chancellor John Healey presents on Wednesday. The test is whether new powers bring old debts down faster than HMRC’s current forecast.
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