Closing The Tax Gap

Amongst the Autumn Budget's headline-grabbing increases to employer NICs and CGT (designed to contribute to an additional £40bn of tax revenue), Labour has unveiled further details on their "most ambitious ever package to close the tax gap" which they estimate will raise a further £6.5bn a year by 2029-30.

Back in April when Labour published their plan to close the tax gap, there was a real focus on tackling tax avoidance and evasion to, as Rachel Reeves put it, "take on the tax dodgers". However, avoidance is the smallest portion of the tax gap at just 4% and, while evasion (including the "hidden economy" which is also a form of evasion) makes up 19% of the tax gap, the main contributor to the gap at 30% is taxpayers' failing to take reasonable care. It was, therefore, evident that while targeting tax evasion may help to reduce the tax gap (which would, clearly, be a positive result), Labour would also need to look to other areas of compliance to raise the large