Is HMRC getting tougher on unpaid tax? What the NAO tax debt report shows

The National Audit Office (NAO), which audits government spending, published its report on HMRC’s management of tax debt on 23 October 2026. It shows how much tax is owed, how HMRC is chasing it and how many businesses and individuals are paying in instalments. Below we pick out what matters if you run a business with a tax bill coming. Smart Funding Solutions is a broker, not a lender. We compare options across 300+ lenders and arrange business finance from £10,000 to £20 million.

01How much tax is owed to HMRC?

At the end of 2025-26, 8.2 million taxpayers were in debt to HMRC, owing £43.8 billion between them. That is 4.7% of the £938.8 billion HMRC collected in the year. The NAO credits HMRC with bringing the share down from 5.6% of receipts in 2022-23, but the balance is still far above where it was before the pandemic.

• In 2018-19 the tax debt balance was £15.1 billion, 2.4% of receipts, according to the full NAO report.
• HMRC estimates £20.2 billion of the balance is at risk of not being collected.
• 51% of the debt by value was over a year old at the end of 2025-26, up from 28% at the end of 2019-20.

HMRC expects its debt to be between 2.9% and 4.2% of receipts by 2029-30, and does not expect to reach its 2.5% target until after that.

02Is HMRC taking more businesses to court?

Yes. The NAO’s figures on enforcement show a sharp rise in the toughest action since 2022-23.

• 2,277 winding-up petitions awarded in 2025-26, up 185% since 2022-23.
• 1,298 bankruptcies started, up 340%.
• 225,118 field collection visits, down 11%.

A winding-up petition can lead to a court ordering a company to close. Our report on company insolvencies in September 2026 shows compulsory liquidations, usually started by creditors such as HMRC, were up 25% on a year earlier. The NAO also found HMRC collected £350 of debt for every £1 it spent on debt management staff in 2025-26.

03Is it easier to get Time to Pay?

Payment plans, often called Time to Pay arrangements, are being used far more than before, and they are longer and larger.

• 690,000 taxpayers had payment plans worth £6.5 billion at the end of 2025-26, compared with 258,000 owing £1.5 billion in 2018-19.
• The average plan ran for 16 months, against 7 months in 2019-20, and the average value was £19,000, against £9,000.
• 138,000 plans covering £967 million were set up online in 2025-26.
• HMRC rejected fewer than 3% of plans proposed by phone between 2023-24 and 2025-26.

There are limits. The NAO notes that the online service is not available for Corporation Tax and cannot cover more than one tax in a single plan. GOV.UK says HMRC checks that a plan is affordable and, for company tax debts, expects you to reduce the debt as much as possible before setting one up. It may ask directors whether they can put in their own money or raise funding.

04What could change next?

In June 2026 the government consulted on requiring businesses to pay some taxes, such as PAYE and VAT, by direct debit, as part of HMRC’s work to stop debts building up in the first place. The Budget on 28 October may also bring changes to tax rules. Our pre-Budget checklist for business owners sets out what is law today and what is only reported.

Payment plans, often called Time to Pay arrangements, are being used far more than before, and they are longer and larger.

05Time to Pay or a tax loan, which suits your business?

Both spread a bill. A payment plan with HMRC keeps the debt with HMRC and depends on HMRC agreeing it is affordable. A tax loan from a lender pays HMRC in full on time, so your account is clear, and you repay the lender over an agreed term. Lenders charge interest and set their own criteria, and many will want to see that your business can afford the repayments.

• VAT loans for a quarterly VAT bill.
• Corporation Tax loans, useful as the online payment plan service does not cover Corporation Tax.
• PAYE loans for payroll taxes.
• Income tax loans for sole traders and partners with a Self Assessment bill.

Our guide to Time to Pay versus a tax loan compares the two side by side, and our HMRC tax loans hub covers every type of tax bill. If you are already in arrears and your credit has suffered, see bad credit business loans. If HMRC has already started court action, get professional advice straight away.

06What it means for your funding

The message from the NAO is that HMRC is helping those who engage and pursuing those who do not. If a VAT, PAYE or Corporation Tax bill is coming that you cannot pay in full, act before the due date. Get your Instant Quotes to see which lenders could fund your tax bill, with no credit check, then a broker compares the options for you. Lenders make every decision, and all finance is subject to status.