HM Revenue and Customs was owed £43.8 billion in overdue tax at the end of the 2025–26 financial year, according to a new National Audit Office (NAO) report, which warns that a growing share of the debt is old and difficult to recover.
The NAO report, published on 23 October 2026, says 8.2 million taxpayers had outstanding tax debts. The £43.8 billion represented 4.7% of tax receipts collected by HMRC during the year.
Almost half may never be recovered
HMRC estimates that 46% of the outstanding tax debt balance may not ultimately be paid. This is an estimate of potential non-recovery, not a statement that the money has already been written off.
The watchdog found that 51% of outstanding tax debt was more than one year old at the end of March 2026, compared with 28% before the pandemic. Debt older than a year and not subject to a payment arrangement rose from £5.3 billion before the pandemic to £18.6 billion.
Before Covid-19, outstanding tax debt was typically about £15 billion, equivalent to roughly 2.5% of receipts. The NAO says the current balance remains substantially above that level, reflecting the legacy of the pandemic, cost-of-living pressures and taxpayers' difficulties meeting liabilities.
Watchdog recognises improvements
The report also acknowledges progress. Tax debt has fallen as a proportion of receipts from 5.6% in 2022–23 to 4.7% in 2025–26. HMRC has increased debt management staffing, used credit reference data to target collection efforts and expanded support for repayment arrangements.
According to the NAO, measures introduced since 2021 have generated an estimated £10.7 billion in additional revenue. The watchdog nevertheless urges HMRC to improve productivity, prevent avoidable debts and respond earlier when payments become overdue.
What happens next?
The report recommends making payment plans easier to manage digitally and improving evidence about which interventions work for different types of debtors. It notes that older cases can be harder to resolve, particularly when taxpayers do not engage.
HMRC says it seeks to support people who cannot pay immediately while taking enforcement action against those who can pay but refuse to do so.
Important distinction: Outstanding tax debt is not the same as tax evasion. It can arise from cash-flow difficulties, insolvency, disputed liabilities or late payment. Nor does the 46% estimate mean that almost half of the money has already been lost.