Economy · Budget & tax · 24 October 2026
NAO reports HMRC tax debt falls for third year
The National Audit Office has published a report stating that HMRC has reduced tax debt as a proportion of receipts for three consecutive years. The total tax debt balance stood at £43.8 billion at the end of 2025-26, despite the department managing significantly more new debts.
The National Audit Office has published a review of HMRC’s performance in managing tax debt. The report confirms that tax debt as a proportion of receipts has fallen for three consecutive years. This reduction occurred while the department dealt with a substantial volume of new liabilities in the 2025-26 financial year.
Figures published with the announcement show the total tax debt balance was £43.8 billion at the end of 2025-26. This amount represents 4.7% of tax receipts, down from 5.6% in 2022-23. HMRC handled £103.6 billion in new tax debt during the same period. About half of the remaining debt balance is older than a year. The NAO estimates that 46% of the tax debt owed at the end of 2025–26 may not be collected.
New measures introduced since 2021 generated £10.7 billion in additional revenue by the end of 2025-26, with spending on these initiatives reaching £368 million. Debt more than a year old and not covered by a payment plan before the pandemic was £5.3 billion. This figure rose to £18.6 billion at the end of 2025-26. HMRC has consulted on introducing direct debits and expanding powers to recover debt from bank accounts. The NAO recommends HMRC focus on workforce productivity and delivering a new IT system.
The report does not state specific limits on the scope of the review or the timeframe for implementing the recommended changes.
Written by StreetOwl from National Audit Office’s own announcement. It was drafted by StreetOwl’s own model, every figure and quotation was checked by code against the announcement, and it was read and approved by Michael Rossi before it went up. It says what was announced, not what anyone should do about it.
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