Soaring tax debts and record business insolvencies have left tax authorities writing off billions as hard-pressed firms collapse under mounting financial pressures.
Tax collectors have written off almost £13 billion in revenue over the past year as businesses collapse under soaring borrowing costs and tax hikes.
Tax debt ballooning to record levels
Total uncollected tax owed to HMRC has more than doubled since pre-pandemic levels, expanding from £19 billion in 2019-20 to £43.8 billion in 2025-26.
Uncollectable debt has trebled over the same period, climbing from £4.2 billion to £12.9 billion.
Official figures from the National Audit Office reveal that £9.8 billion of those losses were direct write-offs, where officials determined debts could not practically be recovered following company liquidations and personal bankruptcies.
Insolvencies rising across key sectors
Business insolvencies jumped by 39 percent between 2019-20 and 2025-26 as mounting taxes and rising costs pushed firms to the brink.
Glen Flannery, of law firm CMS, pointed out the cumulative pressures hitting businesses across the country.
Formal insolvencies remain at historically elevated levels. What we’re seeing now is the cumulative effect of inflation, higher interest rates and increased employment costs landing at the same time.
Nimesh Shah, of accountancy firm Blick Rothenberg, highlighted the heavy burden facing British employers.
The UK tax burden is at its highest levels in modern peace time and changes to tax, labour laws and the minimum wage increase have added significant burden to businesses.
The irony is that the Government increasing the tax burden has had the effect of increasing HMRC’s tax losses.
Nimesh Shah, Blick Rothenberg
Crackdown launched on unpaid bills
Court-ordered winding-up petitions filed by tax authorities skyrocketed by 185 percent between 2022-23 and 2025-26.
This aggressive enforcement follows a pandemic-era freeze when debt collection was suspended, creating a massive backlog of bankruptcies that courts are still processing.
John Hood, of accountancy firm Moore Kingston Smith, explained the shift in tax office enforcement tactics.
HMRC was reluctant during and after the pandemic to wind up companies, but the situation has changed over the past 18 months. HMRC has increased resources to enforce the debt and where necessary will remove companies that have no real prospect of paying their debts.
Construction sector suffering heaviest losses
Tax increases following the autumn Budget in 2024, including employer National Insurance hikes and minimum wage increases, have weighed heavily on firms, with labour-intensive industries suffering the most.
Data from the Insolvency Service confirms the construction sector recorded the highest number of business failures in the 12 months to September.
Total company insolvencies have remained at their highest levels since the financial crisis, surging from 14,000 to 25,000 between 2021 and 2023, before standing at 24,000 in 2025.
Millions owing billions in back tax
An estimated 8.3 million taxpayers owe money to tax authorities in 2025-26, with half of the £43.8 billion total debt now over a year old.
Gareth Davies, of the National Audit Office, urged faster action on uncollected debts.
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.
A spokesman for HMRC defended the department’s performance.
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.