Two numbers came out of the tax system's July paperwork, and together they tell you everything about how Britain is now run. Number one: HMRC's tax gap — the difference between what is owed and what is collected — hit £59.2 billion for 2024/25, rising to 6.4% of all tax due, up from 5.3% the year before. Number two: your personal tax thresholds remain frozen solid, quietly marching millions of ordinary workers into tax bands designed for the wealthy.
Read them together. The state is collecting a smaller share of what it is owed, and compensating by taking a larger share from the people who cannot escape.
The Gap Is Growing, Not Shrinking
HMRC collected £865.2 billion last year — a record. And still the uncollected slice grew, in both cash and percentage terms. A tax gap rising from 5.3% to 6.4% in a single year is not rounding noise; it is a collection system losing ground. Small businesses now account for 62% of the entire gap, which tells you where the complexity, the confusion and the non-compliance actually live — in a tax code so bloated that even people trying to pay correctly can't.
Fiscal Drag: The Tax Rise Nobody Voted On
While the gap widens, the thresholds stay put. Freezing tax bands while wages inflate is a tax rise that never has to be announced, debated or voted on — it just happens to you, payslip by payslip. The OBR's warning on this is genuinely startling: on the current frozen-threshold path, nearly 50 million people could eventually sit in the higher-rate bracket, with two-thirds of earners paying the 40% rate by the late 2060s. A rate designed in the 1980s for the top few percent, redesigned by inaction into the standard rate for working Britain.
And Now: Quarterly Paperwork, Too
The same self-employed workers and small landlords who carry the compliance burden just got a new one: Making Tax Digital went live in April, and the first mandatory quarterly digital update is due by 7 August. More filings, more software subscriptions, more ways to get an honest return wrong — aimed at exactly the group HMRC's own numbers say is drowning in complexity already. The gap will not be closed by quadrupling the paperwork of plumbers.
What Reform UK Would Do
Reform UK would end the stealth squeeze. Unfreeze the thresholds and lift the personal allowance substantially, so the lowest-paid keep more of every hour they work. Simplify the tax code that generates the £59 billion gap instead of hiring more people to administer the complexity. And scrap the assumption, shared by both old parties, that the compliant middle can be drained indefinitely to cover for a system that leaks by design.
A £59 billion hole and a frozen threshold are two sides of one bargain — and working Britain didn't sign it.