A new report by the National Audit Office (NAO) reveals the UK's tax system is becoming increasingly complex, driving up administrative costs for businesses by hundreds of millions of pounds per year. The report also highlights 'poor levels of service' experienced by taxpayers, leading to a decline in trust towards HMRC.
A recent report by the National Audit Office (NAO) has revealed concerning trends within the UK's tax system . The report highlights the escalating complexity of the system, which is driving up administrative costs for businesses, leading to significant financial burdens. The NAO estimates that businesses spend around £15.4 billion annually to comply with the tax system , a figure that is likely understated.
This complexity also contributes to 'poor levels of service' experienced by taxpayers and their representatives, according to the report, resulting in a decline in trust towards HM Revenue and Customs (HMRC). The report identified a 15% (£563 million) surge in real-terms administration costs for HMRC between 2019-20 and 2023-24, reaching a total of £4.3 billion. This increase is directly attributed to the growing complexity of the tax system. While HMRC maintains that it collects every pound of tax revenue at a cost of just half a penny, the NAO's findings suggest a need for greater efficiency and modernization within the system. HMRC has acknowledged the need for improvement and has stated it is already working on modernizing the tax system to deliver better services and reduce bureaucratic burdens. Gareth Davies, the head of the NAO, emphasized the importance of a modern, efficient tax system that empowers both individuals and businesses to navigate their tax obligations effectively. He called for a deeper understanding of the impact of system changes on administrative costs and the financial burden they place on taxpayers. Davies also highlighted the challenges HMRC faces in updating its digital infrastructure, noting that despite significant investments, upgrades have been slower and more expensive than anticipated. Furthermore, he pointed to the growing number of individuals liable for Income Tax, rising from 31.7 million in 2020-21 to 36.2 million in 2023-24, attributing this increase to stagnant income tax thresholds since April 2022, coupled with population and employment growth.
TAX SYSTEM HMRC ADMINISTRATION COSTS BUSINESS BURDENS DIGITAL INFRASTRUCTURE NATIONAL AUDIT OFFICE
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