Rachel Reeves has been hit by a fresh tax crisis after HMRC revealed an astonishing £59.2billion went uncollected in a single year. The colossal “tax gap” — the difference between the amount theoretically owed and the sum actually received — reached 6.4% of all tax due in 2024-25.

It means HMRC collected 93.6% of the £924.4billion it was expected to receive, leaving the Chancellor facing questions over whether the taxman is doing enough to pursue money already owed. The black hole is equivalent to almost four times the annual cost of employing England’s police officers and dwarfs the sums raised by many of Labour’s controversial tax increases. Rachael Griffin, tax and financial planning expert at Quilter, said: “Closing even a fraction of the £59.2billion tax gap could play a meaningful role in supporting the public finances without the need for further headline tax rises.

“Improving how the system works in practice, particularly for small businesses and those newly entering self-assessment, may prove just as important as any changes to tax rates in the months ahead.

“Simplifying a tax system that continues to grow ever more complex should be high up on the to-do list.”

Small businesses accounted for 62% of the missing revenue — around £36.7billion — according to the provisional estimates.

Corporation Tax alone was responsible for £21billion of the gap, with HMRC estimating that 44.6% of the Corporation Tax theoretically owed by small businesses was not collected.

The scale of the losses will heap pressure on Ms Reeves as households and firms face a mounting tax burden.

HMRC chief executive JP Marks added: “Today’s estimates reflect the changing world in which HMRC operates, where it is becoming more difficult to tackle non-compliance through traditional approaches alone.

“That is why our aim is a well-designed modern tax system that makes it easier to get things right first time and harder to get things wrong, and which allows us to respond effectively to non-compliance and tackle criminal activity.”

However, the £59.2billion was not entirely lost through deliberate tax dodging.

HMRC’s tax-gap calculations include mistakes, carelessness, disputed interpretations of tax law, unpaid bills, avoidance, evasion and criminal attacks on the system.

HMRC warned that the two most recent years were partly based on projections because of delays in obtaining complete data.

Officials also urged caution when comparing the latest figures with previous years because improvements in the way small-business Corporation Tax losses are measured have uncovered more non-compliance.

Despite the eye-watering cash total, the tax gap remains below the 7.5% recorded in 2005-06.

HMRC said its figures represented the best estimates available but acknowledged significant uncertainty surrounding parts of the calculation.

JP Marks, HMRC Chief Executive and First Permanent Secretary, said: “Today’s estimates reflect the changing world in which HMRC operates, where it is becoming more difficult to tackle non-compliance through traditional approaches alone.

“That is why our aim is a well-designed modern tax system that makes it easier to get things right first time and harder to get things wrong, and which allows us to respond effectively to non-compliance and tackle criminal activity.

“Measuring the tax gap helps us track long-term trends, which influence our policies and compliance strategy, allowing us to focus our efforts in the right places. In 2024-25, we collected and protected a record £48 billion in compliance yield. This is money that would have gone unpaid without our intervention.