HM Revenue and Customs (HMRC) is encountering growing difficulties in collecting longstanding tax debts, according to the National Audit Office (NAO). The total amount of unpaid tax debts more than a year old and not under a payment plan has increased sharply, rising from £5.3 billion before the COVID-19 pandemic to £18.6 billion by the end of the 2025-26 fiscal year.

The NAO report indicates that approximately 8.2 million taxpayers currently owe money to HMRC, with total outstanding debts reaching £43.8 billion. This figure represents about 4.7% of all tax receipts, a decrease from 5.6% recorded in 2022-23. The reduction in the proportion of late payments highlights some improvement but also underscores the persistent scale of the problem.

Nearly half of newly incurred tax debts are resolved within a month, suggesting that many taxpayers either initially overlooked payments or faced temporary cash-flow difficulties. The NAO’s findings point to a distinction between short-term arrears and older debts that remain unpaid for extended periods, with the latter proving more challenging for HMRC to recover.

Gareth Davies, chief of the NAO, acknowledged the progress HMRC has made in recent years, particularly during the unprecedented circumstances brought about by the pandemic. However, he emphasized that the agency now confronts a significant issue in managing older debt portfolios. Davies urged HMRC to prioritize preventing avoidable debts by enhancing early intervention and quickly addressing payment arrears as they arise.

The report underscores the importance of targeted strategies to reduce the accumulation of long-term debt, which burdens both the tax authority and the public finances. As HMRC seeks to improve debt recovery rates, balancing effective enforcement with support for taxpayers facing genuine difficulties remains a key challenge.