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’. As the overall burden of tax rises, chasing down the tax that should have been paid rather than raising fresh taxes becomes an ever more attractive option for the Chancellor.

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

• Dividends Some self-assessment taxpayers received a letter recently asking them to check that their tax return included all dividends received in 2023/24. 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 Last tax year HMRC sent out 65,000 letters to people suspected of not declaring gains on cryptocurrencies, such as Bitcoin. Normally crypto gains are subject to capital gains tax, but active traders can face an income tax charge.
• Online marketplace earnings Early in 2025 HMRC mailed people which it thought had earnings from an online marketplace (for example, eBay) made before 6 April 2023 and had not yet paid tax on their sales.
• 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, issued 20,000 letters 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.

With the 2024/25 self-assessment deadline nearing, 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.

✣ The Financial Conduct Authority does not regulate tax advice. Tax treatment varies according to individual circumstances and is subject to change.