Tax avoidance and evasion among the UK’s wealthiest individuals is on the rise, with underpaid liabilities climbing from £1.9bn to £2.1bn in the last year, according to new analysis from UHY Hacker Young.
The 17% annual rise forms part of a multi-year trend, prompting concern that HMRC will intensify its focus on affluent taxpayers.
“These numbers tell you where we can expect HMRC to launch its crackdown against wealthy people, where unpaid tax is rising, and against small businesses where the tax gap has jumped to £28bn from £25.9bn,” said Neela Chauhan, partner at the accountancy group.
In response, Chancellor Rachel Reeves has allocated what UHY Hacker Young describes as “substantial new resources” to HMRC, a move that could signal an uptick in tax investigations and more assertive tactics from the tax authority.
Chauhan warned that individuals should prepare for “unannounced visits by the taxman and more aggressive mailshots from HMRC to individuals it suspects of underpaying tax.”
The rise in underpaid tax is largely driven by underreported income and gains, from rental earnings and offshore accounts, to increasingly, digital assets.
With traditional offshore structures becoming more transparent, HMRC is now turning its attention to cryptocurrency wallets and exchanges, where assets can be concealed with relative ease.
Despite the growing focus on enforcement, Chauhan pointed out that legitimate tax planning options remain available for the affluent.
“Pensions delivered £29bn in tax benefits in the last year and ISAs £9.4bn, and EIS and VCT schemes are aimed mainly at the wealthy,” she said. “Sensible tax planning can also reduce IHT bills that would otherwise be fairly damaging to family wealth.”
But those attempting to sidestep the system entirely could face steep penalties. “HMRC takes any action by wealthy taxpayers to evade tax very seriously,” Chauhan added.
“They could be subject to substantial fines or even face prosecution. HMRC will pursue custodial sentences if the evasion is particularly egregious.”