The tax authorities are finding new ways to close the ‘tax gap’.

A Budget would not be a Budget without a raft of measures designed to ‘close the tax gap’ (estimated at £46.8bn in 2023/24) and ‘collect tax that is due’.

HMRC has grown increasingly zealous in its search for missing tax. For example, it regularly sends out ‘nudge’ letters covering areas such as:

• Dividends Unlike bank and building society interest, there is no automatic reporting to HMRC of dividends, something that has become more significant following the drastic cuts to the dividend allowance.
• Crypto Normally crypto gains are subject to capital gains tax, but active traders can face an income tax charge.
• Online marketplace earnings Earnings from any online marketplace (for example, eBay) are subject to tax.
• Overseas income and gains Most countries, including the main tax havens, automatically send HMRC details each year of offshore accounts held by UK residents. In 2024/25 HMRC received over 10 million reports and collected £80.1 million in ‘compliance yield’.

Alongside ‘nudge’ letters, HMRC is using its own big data system, Connect, to join the dots and identify anomalies in tax returns. In October 2025, a Freedom of Information request revealed that in 2024/25 Connect had enabled HMRC to find 540,000 cases of undeclared tax, producing £4.6 billion for the Exchequer. A recently announced partnership with a leading US data analytics company, Palantir, means that in the future more powerful artificial intelligence will become available to exploit Connect data.

HMRC’s growing ability to spot errors is a reminder to take great care when assembling the information for your tax return. It may also be a reminder that you should review whether you can simplify your tax affairs by restructuring how you hold investments.