In its latest report, the NAO has examined HMRC’s performance in ensuring that wealthy individuals pay the correct amount of tax.  

HMRC defines wealthy individuals as those earning more than £200,000 a year, or with assets over £2m, in any of the last three years. HMRC’s compliance activities, which are led by its ‘wealthy team’, include interventions to promote compliance (eg, legislative change, education and digital prompts) and to investigate non-compliance.  

The NAO has given credit to HMRC for increasing its annual compliance yield from wealthy individuals by approximately £3bn between 2019-20 and 2023-24. However, the NAO notes that this figure exceeds HMRC’s annual estimate of the wealthy tax gap (£1.9bn), suggesting that HMRC may have underestimated underlying levels of non-compliance among the wealthy.  

The NAO has made several recommendations to HMRC, including that HMRC should “develop a clear strategic vision and plan for its work tackling wealthy non-compliance".  

ICAEW’s view 

Katherine Ford, Technical Manager, ICAEW, gave evidence to the NAO. Reflecting on the report, Ford said: “The report makes interesting reading and there are some good suggestions here for HMRC to build on its strong performance to date. However, more work may be needed to get behind the figures. For example, in 2023, HMRC secured tax of £652m from one case alone. This demonstrates that figures can fluctuate from year to year and that a longer-term view may be needed”.   

Frank Haskew, Head of Taxation Strategy, ICAEW, added: “In recent years, the impression was that HMRC was focusing on the rise in the SME tax gap and that the wealthy tax gap was declining. This report suggests that the focus on the SME tax gap might need to be reconsidered, and a more holistic approach adopted.”   

Key findings

All figures are for 2023-24 unless stated otherwise.

• There were 850,000 wealthy individuals in the UK, equivalent to 2% of all taxpayers. This is up from 700,000 in 2018-19. The NAO recommends that HMRC keeps its definition of wealthy individuals under review and considers whether breaking the population down into different wealth bands would help it to better target its resources.
• Wealthy individuals paid £119bn in personal taxes, or 25% of personal tax receipts.  The NAO suggests that “HMRC should consider how it can provide the public with greater transparency about the amount of tax that wealthy individuals pay”.
• 73% of wealthy individuals are represented by a tax agent. The NAO recommends that HMRC does more to “improve its understanding of how tax professionals influence compliance, in a positive and negative way”.
• At least £849bn was held in offshore accounts by UK residents at December 2019. The NAO says that HMRC should “continue to improve its assessment of the offshore tax gap”.
• HMRC’s compliance activities with wealthy individuals cost £350m. The wealthy team closed 8,807 investigations, down from 15,569 in 2018-19. However, each case brought in £93,800 on average, up from £34,100 in 2018-19, reflecting HMRC’s focus on high-value cases.
• HMRC issued 456 penalties to wealthy individuals (representing 5% of the cases the wealthy team closed), totalling £5.8m, down from 2,153 penalties (14% of cases closed), totalling £16.2m, in 2018-19.
• The number of wealthy individuals subject to criminal prosecutions by HMRC reduced significantly from 30 in 2019-20 to five in 2021-22, but this has since increased to 25 in 2023-24.