PAYE tax gap reduced in 2017-18

20 June 2019

HMRC has published the latest figures for 2017-18 which reveal that the UK’s overall tax gap is now 5.6%, a slight increase of 0.1% on last year’s figures.  However, with one of the lowest gaps of all taxes, the PAYE tax gap reduced from 1.1% in 2016-17 to 1% in 2017-18.

The tax gap is the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid. The tax gap is a useful tool for HMRC to understand the relative size and nature of non-compliance. Despite the slight increase this year HMRC has still collected 94.4% of all the tax due under the law in 2017 to 2018. Overall, the tax gap has fallen from 7.2% since 2005-06, with the Office for Statistics Regulation stating that

“HMRC is world-leading in measuring tax gaps and is setting the bar for others to follow”.

In 2017-18, the total estimated tax gap for income tax, National Insurance contributions and Capital Gains Tax is £12.9 billion which equates to 3.9% of total theoretical liabilities.

Of this £12.9 billion, £7.4 billion is attributable to Self Assessment taxpayers, meaning that the tax gap was 14.9% of theoretical liabilities.

In contrast, £2.9 billion of the income tax, National Insurance contributions and Capital Gains Tax gap comes from employers, where money is deducted at source, which translates into a tax gap of 1.0% of theoretical liabilities.

Read the full Measuring Tax Gaps report


CIPP Payroll Assurance Scheme

Such a low figure shows how committed payroll practitioners are to ensuring that they fulfil their obligations.  The CIPP’s Payroll Assurance Scheme helps payroll departments to verify that processes are in place to ensure accurate payments to payees but also to ensure that appropriate deductions are made from employees pay and are accounted for to HMRC and other authorities.