Reeves eyes Al to 'hunt down' every penny of tax

CHANCELLOR Rachel Reeves wants to raise more tax. That doesn't just mean hiking rates, but collecting the tax people already owe. And HMRC is under orders to get a lot more aggressive about it. Reeves has put £100million into HMRC's compliance teams, hiring 500 new inspectors and handing them cutting-edge AI tools to hunt down every possible penny.

- By Harvey Jones

So far, it's working. But ordinary taxpayers need to tread carefully.

It’s right that everyone should pay what they owe. But as HMRC ramps up its campaign, mistakes and misunderstandings could be costly, especially for those who have tried to limit their exposure to recent tax increases. If you've sold assets, used allowances, claimed relief or moved money around, make sure you’ve done it all by the book. If not, you could be hearing from the taxman.

TAX

The UK collected 94.7% theoretical tax liabilities in 2023-24, HMRC figures show. That leaves a 5.3% shortfall, equivalent to £46.8billion. Reeves could do with that.

Rachael Griffin, tax and financial planning expert at Quilter, said the tax gap was closing in areas like VAT and income tax, but small business owners are harder to catch, now accounting for 60% of total tax gap.

Ordinary taxpayers only account for 10% of the tax gap, Griffin said. “Thanks to frozen income tax thresholds and lower allowances, particularly for dividends and capital gains, more people are being pulled into the tax system for the first time, often without realising it.”

Many are likely to be pensioners, as triple lock increases push the state pension closer to the £12,570 personal allowance.

“That raises the risk of accidental non-compliance.”