UK VAT Gap Increases By £3 Billion in 12 Months

According to the latest HMRC estimates, the UK’s VAT gap based on the 2024-25 figures has widened – increasing to about £11.9 billion.

The increase is £3 billion, up from the £8.9 billion reported gap published in the 2023-24 figures.

This means the VTTL (the VAT Total Theoretical Liability) which is the difference between the VAT that should be collected and what is actually collected, has therefore also increased, from 5% to 6.5%.

The EU block recently reported an increase of its VAT from €101 billion to €128 billion. The average VTTL across the block is 8.2%. Comparatively the UK is lower than its European neighbours.

The UK has announced its intention to go live with B2B and B2G electronic invoicing in April 2029 through a 4-corner model. HMRC is in consultation with stakeholders to design the regime ahead a broader announcement November 2026.

This content is intended to share insights and practical considerations based on industry experience. It does not constitute legal, regulatory, or financial advice. Regulatory requirements vary by jurisdiction and circumstance, so any compliance-related matters should be reviewed and validated with your own professional advisors.