HMRC arms itself with supercomputers, 500 inspectors and global data to close £46.8bn tax gap
Chancellor Rachel Reeves empowers HMRC with AI and 500 new inspectors to recover billions in unpaid taxes, warning even ordinary taxpayers to review their finances amid growing scrutiny.
Chancellor Rachel Reeves has intensified efforts to recover billions in unpaid taxes by arming HM Revenue and Customs (HMRC) with cutting-edge artificial intelligence tools, additional staffing, and aggressive compliance mandates. With a £100 million investment and the recruitment of 500 new tax inspectors, the government aims to pursue every unpaid penny—sending a clear message that tax evasion and error will no longer go unnoticed.
“It is hard to see how they can achieve those targets without a sharp rise in tax investigations,” said Ian Robotham, legal director at Pinsent Masons, reflecting growing concern across the financial sector.
The move comes amid a widening tax gap, with HMRC data showing that 5.3% of theoretical liabilities—amounting to £46.8 billion—went uncollected in the 2023–24 fiscal year. Reeves’s renewed focus is not just on large-scale fraud, but also on closing the smaller loopholes where compliance is lacking.
Rachael Griffin, tax and financial planning expert at Quilter, highlighted that while areas such as VAT and income tax are seeing improved compliance, small businesses now represent 60% of the total gap. In contrast, ordinary taxpayers account for just 10%, though many are being inadvertently drawn into the system due to frozen tax thresholds and reduced allowances.
“Thanks to frozen income tax thresholds and lower allowances, particularly for dividends and capital gains, more people are being pulled into the tax system for the first time, often without realising it,” Griffin warned. She added that pensioners—whose triple-locked state pensions now hover near the £12,570 personal allowance—are especially vulnerable to accidental non-compliance.
Backing HMRC’s workforce is its formidable Connect supercomputer, which cross-references billions of data points on UK taxpayers. With access to bank accounts, property sales, crypto wallets, eBay sales, LinkedIn profiles, and Airbnb listings, the system uses AI to identify patterns and flag suspicious activity.
Law firm Pinsent Masons reported that this tech-powered crackdown is already paying off. Investigations targeting individuals with incomes over £200,000 or assets above £2 million yielded £1.5 billion in recovered tax in the year to April 2024—more than double the previous year’s total of £713 million.
And the scope is not limited to domestic affairs. International data-sharing agreements now give HMRC visibility into overseas assets, challenging the assumption that foreign holdings are out of reach.
“Penalties in respect of inaccuracies can be mitigated down where taxpayers are proactive in contacting HMRC to tell them about and assist them in resolving inaccuracies,” Robotham advised.
Neela Chauhan, a partner at UHY Hacker Young, urged both wealthy individuals and small business owners to remain vigilant. “We expect that to translate into unannounced visits by the taxman and more aggressive mailshots from HMRC to individuals it suspects of underpaying tax,” she said.
Even those earning side income, dabbling in crypto, or selling items online should take note. With AI sharpening HMRC’s focus, unintentional errors are becoming easier to detect—and more expensive to ignore.
Taxpayers are urged to maintain thorough records, review all income declarations, and consult professionals if their financial activities involve irregular transactions like property sales or digital assets.
Ultimately, experts say compliance is the safest path forward. “The taxman is watching,” reads the warning. And this time, he’s equipped with AI, global access, and a mandate to act.
