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HM Revenue and Customs (HMRC) faces an increasing problem of older tax debts which are harder to collect, according to a spending watchdog.
The National Audit Office (NAO) said HMRC is facing increasing issues from debtors who do not engage with it.
Debt that was more than a year old and not covered by a payment plan increased from £5.3 billion before the coronavirus pandemic to £18.6 billion at the end of 2025-26, with cost-of-living pressures making it harder for some taxpayers to pay.
At the end of 2025-26, 8.2 million taxpayers were in debt to HMRC, with their tax debts totalling £43.8 billion, or 4.7% of total tax receipts.
This is down from 5.6% in 2022-23, the NAO said, with a peak of 9.3% having previously been recorded at the end of 2020-21, during the coronavirus pandemic, when HMRC paused its debt enforcement activities.
But the NAO’s report said: “The tax debt balance remains significantly higher than the pre-pandemic period: in the five years between 2015-16 and 2019-20, tax debt was typically around £15 billion, or 2.5% of tax receipts.”
Nearly half of new debts are resolved within a month, which suggests that taxpayers forgetting to pay their tax bill or having short-term cash-flow problems are likely causes, the NAO said.
But about half of the remaining debt balance is older than a year, making it harder and less likely to be recovered.
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Around 51% of tax debt was more than one year old at the end of 2025-26, up from 28% at the end of 2019-20.
The report said: “Tax debts have been getting older on average and are therefore more difficult to collect, with HMRC estimating that 46% of the tax debt balance at the end of 2025-26 may not be paid.”
Since 2021, HMRC has introduced new measures to manage tax debt, including recruiting more staff, increasing its use of private sector debt collection agencies and using data to tailor its approach to different debtors.
HMRC estimates that this generated £10.7 billion in additional revenue by the end of 2025-26, against spending of £368 million.
HMRC has consulted on introducing direct debits to help eliminate payment errors and expanding the scope of its powers to directly recover debt from taxpayers’ bank accounts for smaller debts, with outcomes expected to be announced in the upcoming Budget, the NAO said.
The report said that HMRC needs to go further in tackling inefficiencies in its processes and systems and improving the productivity of its existing workforce.
It recommended that HMRC make payment plans more automated and easier to manage digitally, and use better evidence to identify which interventions work best for different debtors and in different circumstances.
This could allow staff to concentrate on older and harder-to collect debts, as well as taxpayers who do not engage with HMRC.
Gareth Davies, head of the NAO, said: “HMRC has made good progress on tax debt in the challenging circumstances of recent years, but faces an increasing problem of old debt which is harder to collect.
“HMRC should now focus on preventing avoidable debt and acting quickly when debts arise.
“It has some promising improvements in train but needs to continue its efforts to get more productivity out of its staff and systems.”
An HMRC spokesperson said: “We welcome this report, which recognises the progress we’re making in collecting the vast majority of tax debts while supporting customers who owe tax.
“We make it easy for those who can pay, support those who need help, and take firm action against those who choose not to engage with us about their tax debts.”
