Firms delay tax payments as costs soar
Unpaid business tax liabilities are averaging as much as £28bn a month this year, official data has revealed, suggesting firms are struggling to keep up with mounting costs.
Chancellor Rachel Reeves’ £40bn tax hikes last autumn, including rises to employers’ national insurance contributions, were designed to lift the public finances and reduce borrowing.
But new data released by HMRC after a Freedom of Information request has shown that businesses are struggling to keep up with the additional demands for cash from the Treasury.
Tax payments delayed
According to official accounts, businesses owed up to £29bn to HMRC in February this year in unpaid corporation tax, VAT, and national insurance, indicating that firms may be delaying payments to the taxman.
Revenue losses, which include remissions and write-offs, reached a total of £5.6bn in 2024, with the total loss increasing steadily each month throughout the year.
Unpaid VAT liabilities stood at an average of £12bn a month between January and March while outstanding debts in corporation tax have come in at around £7bn a month.
The total amount of overdue PAYE or national insurance debt payments, which both employers and employees contribute, was consistently above £8bn a month this year.
Figures for April were not available, HMRC said.
Firms put off payments to preserve cash
The FoI request was filed by software company Basware and anti-money laundering platform Napier AI.
Business leaders at the tech companies said late payments reflected the pressures faced by businesses amid higher costs via tax hikes, soaring energy prices and the threat of President Trump’s tariffs, which risk weakening exporters’ sales.
“Our systems are detecting a substantial spike in invoice rejections as businesses scramble to renegotiate contracts, many shell shocked by tariff trauma of the last few weeks,” Jason Kurtz, chief executive at Basware, said.
“In response to the economic turbulence, it’s likely companies are stockpiling their reserves and putting off paying tax liabilities in an effort to preserve cash flows.”
Napier AI boss Greg Watson said: “Increased economic uncertainty and volatility, which is being driven by global macro events like fluctuating tariffs, is creating opportunity for increased financial crime.
“There needs to be increased scrutiny from institutions that are enabling businesses with financial services.”
An HMRC spokesperson said: ““We take a supportive approach to dealing with customers who have tax debts, working with them to find the best possible solution based on their financial circumstances.”
Tax crackdown generates income
Fresh data on unpaid tax debt comes as the National Audit Office said wealthy people earning more than £200,000 a year or with assets of more than £2m paid a quarter of the total UK tax receipts.
Reeves has targeted tax avoiders in a bid to boost public finances and ensure compliance.
The NAO’s report claimed that the Treasury’s crackdown on the super wealthy’s tax payments has brought it an extra £5.2bn in revenue in 2024.
The report said HMRC should “consider how it can provide the public with greater transparency about the amount of tax that wealthy individuals pay”.
Reeves also followed through on abolishing the non-dom tax regime, which allowed foreign investors living in the UK to avoid paying taxes on their assets held abroad.
But according to a report by the Centre for Economics and Business Research (CEBR), the government’s tax revenues would drop by an estimated £12.2bn if half the number of non-doms leave by 2030.
A government spokesperson said it did not “recognise these figures”.