Official Statistics

Preliminary estimate of the VAT gap (tax year 2023 to 2024)

Updated 30 October 2024

An Official Statistics release. Published 30 October 2024.

1. What is the VAT gap?

The VAT gap is measured by comparing the net VAT total theoretical liability (VTTL) with actual receipts. This compares the amount of VAT HMRC expects to receive and the VAT HMRC actually receives. The VAT gap is reported here both as a difference between VTTL and receipts (point estimate), and as a percentage of VTTL. The VAT gap methodology uses a ‘top-down’ approach.

2. Preliminary estimate of the VAT gap for tax year 2023 to 2024

The table below shows the headline figures used to produce the preliminary VAT gap estimate for tax year 2023 to 2024

Financial year	Net VAT total theoretical liability	HMRC net VAT receipts	Net VAT receipts related to net VAT total theoretical liability in 2023 to 2024	VAT gap (point estimate)	VAT gap (per cent)
2023 to 2024	£177.5 billion	£168.8 billion	£168.1 billion	£9.5 billion	5.3

The amounts calculated are rounded to the nearest £0.1 billion and the VAT gap as a percentage has been rounded to the nearest 0.1 per cent. Net VTTL and net VAT receipts are expressed net of payments and repayments. A portion of the VTTL estimate is projected rather than actual expenditure.

The first estimate of the VAT gap for 2023 to 2024 at 5.3% (£9.5 billion) shows an increase in percentage terms compared with the estimate of the VAT gap for 2022 to 2023 of 4.9% (£8.1 billion) published in ‘Measuring tax gaps 2024 edition’. It also shows a reduction on the 2021 to 2022 estimate of 5.9% (£8.4 billion), in the same publication.

The 2023 to 2024 net receipts figure in the VAT gap model includes adjustments to account for policies which affect VAT payments which are received in one year, and accrued in another. This adjustment to VAT receipts ensures when estimating the VAT gap for 2023 to 2024 that only the net VAT receipts which related to the net VAT total theoretical liability (net VTTL) in 2023 to 2024 are properly taken into account. This figure is shown in a separate column in table above, ‘Net VAT receipts related to net VAT total theoretical liability in 2023 to 2024’.

3. Details of HMRC’s VAT gap publications

Previously, HMRC has published three estimates of the VAT gap for the latest tax year each year: the first in the autumn, the second in the spring, and the third as part of HMRC’s ‘Measuring tax gaps’ publication in the summer.

The preliminary estimate of the VAT gap for 2023 to 2024 has now been published at Autumn Statement 2024. It is based on a full year of household expenditure data in line with ONS Consumer Trends data published on 30 September 2024 - which accounts for around 70% of the VTTL. This data aligns with the ONS National Accounts Blue Book 2024, which will be published on 31 October 2024. For this publication, we have used the ONS National Accounts Blue Book 2023 non-household data and a forecast produced by the Office for Budget Responsibility (OBR). The Blue Book data accounts for the remaining 30% of the VTTL, and comprises government, charities, businesses making non-business or supplies exempt from VAT, and housing.

We anticipate that HMRC will publish a second estimate of the VAT gap for 2023 to 2024 in the spring. This second estimate will incorporate the ONS Consumer Trends data which will be published on 23 December 2024. It will also include the latest ONS National Accounts Blue Book 2024 non-household expenditure data but will continue to forecast around 30% of the 2023 to 2024 VTTL in line with the latest OBR forecasting assumptions.

HMRC will publish a VAT gap estimate for 2023 to 2024 along with an updated historical series as part of the ‘Measuring tax gaps 2025 edition’ publication in summer 2025. It is expected to include further updates, such as ONS Consumer Trends data.

Due to timing the ‘Measuring tax gaps 2025 edition’ publication will not include the Blue Book 2025 data, therefore 30% of the 2023 to 2024 estimate will remain forecasted until the publication of ‘Measuring tax gaps 2026 edition’.

For details on assumptions provided by the OBR, go to OBR publications. For details on Blue Book data go to ‘UK National Accounts, The Blue Book time series’. For details on the Consumer Trends data go to ‘Consumer trends time series’

For details on the Measuring tax gaps publication, go to Measuring tax gaps.

4. Revisions policy

HMRC’s policy is to only publish a revised historical VAT gap series once a year, within the Measuring tax gaps publication, incorporating both new and revised data and methodological improvements together.

5. Methodology

Further information on the methodology used to estimate the VAT gap can be found in ‘Measuring tax gaps 2024 edition - Methodological annex’, Chapter D

6. User engagement

HMRC is committed to providing impartial quality statistics that meet our users’ needs. We encourage our users to engage with us so that we can improve our Official Statistics and identify gaps in the statistics that we produce.

If you have any comments or questions about these statistics then please contact the responsible statistician directly. Go to Statistics at HMRC for further information.

7. Publication info

Theme: the economy

Released: 30 October 2024

Next release: Spring 2025

© Crown copyright 2024

8. Contact

For statistical enquiries contact:

revenuemonitoring@hmrc.gov.uk

Knowledge, Analysis and Intelligence
HM Revenue and Customs
100 Parliament Street
London
SW1A 2BQ

For media enquiries, contact the HMRC press office (Business and Corporate desk): 03000 550 493