Wealthy Individuals Under the Spotlight: HMRC Doubles Down on Tax Compliance
HMRC has significantly increased its efforts to recover tax from the UK’s wealthiest individuals, but a recent report suggests there’s still a long way to go in closing the wealth-related tax gap.
Over the past five years, HMRC has recovered more than double the amount of tax from wealthy individuals – £5.2bn in 2023-24, up from £2.2bn in 2019-20. This rise is largely attributed to increased compliance activity and proactive engagement, supported by a specialist wealth team. Despite these efforts, the true extent of non-compliance in this group may still be underestimated.
There are approximately 850,000 individuals classified as ‘wealthy’ in the UK – defined as earning over £200,000 or holding assets above £2 million. Collectively, they contribute a significant £119bn in personal taxes, averaging around £140,000 per individual, with income tax making up the bulk of this figure.
Interestingly, nearly a third of this group does not have representation from an accountant or tax adviser, meaning HMRC often deals with individuals directly, or not at all. Only a small fraction – about 15,000 – are assigned a dedicated compliance manager at HMRC, raising questions about whether oversight is adequate.
The cost of HMRC’s specialist approach to managing these taxpayers has risen too, from £190m to £350m in five years. However, for every £1 spent, HMRC is recovering £15 – an efficiency gain on previous years. Each case now returns nearly £94,000 on average, almost triple what was being recovered per case in 2018-19.
Yet, despite improvements in yield, the number of compliance cases being opened has nearly halved since 2018-19, from 15,000 to under 9,000. While HMRC’s targeting has become more accurate, the volume of casework has declined. Delays in investigations are also an issue, with some higher-value cases taking more than three years to resolve.
Another area of concern is the amount of tax lost due to incorrect reporting, especially around personal income, capital gains, and offshore income. In 2023-24, over half of all closed investigations centred around inaccuracies. Offshore non-compliance and legacy issues around the former non-dom regime also continue to pose risks.
While the number of criminal convictions related to tax offences has started to rebound, penalties issued to wealthy individuals have dropped sharply – just £5.8m in 2023-24 compared to £16.2m in 2018-19. Meanwhile, fewer prosecutions are being brought as HMRC shifts its focus to targeting high-value, high-risk fraud, though court delays are compounding enforcement issues.
Even with increased yield, the official tax gap estimate for this group may not reflect the true scale of non-compliance. HMRC itself recognises this and is developing new tools and strategies to improve oversight, especially concerning offshore wealth and complex ownership structures.
As HMRC continues to refine its approach, wealthy individuals – particularly those without professional tax support – face greater scrutiny. For those in this category, the risks of falling behind on compliance are rising fast. Ensuring you have expert advice in place is more important than ever.
