HMRC Is Owed £43.8bn. What Does the NAO’s Tax Debt Report Mean for Accountancy Practices and Their Clients?

What did the NAO find about HMRC’s tax debt?

The National Audit Office report on HMRC’s management of tax debt, published on 23 October 2026, found the following.

• £43.8 billion owed. Tax debt stood at £43.8 billion at the end of 2025 to 2026, or 4.7% of total tax receipts, down from 5.6% of receipts in 2022 to 2023.
• 8.2 million taxpayers in debt to HMRC at the end of 2025 to 2026.
• Older debt. 51% of the debt by value was more than a year old, up from 28% at the end of 2019 to 2020. Debt over a year old and not in a payment plan rose from £5.3 billion to £18.6 billion.
• Some will never be paid. HMRC estimates that 46% of the debt balance at the end of 2025 to 2026 may not be paid.
• Age matters. HMRC estimates it collects 81.5% of debts less than one year overdue, but only 15% of debts more than two years overdue.

HMRC has brought debt down as a share of receipts, helped by a 20% rise in staff numbers between 2023 to 2024 and 2025 to 2026, but the NAO says extra staff are now bringing diminishing returns and that preventing debt is key to bringing the balance down.

What does the NAO want HMRC to change?

Among its recommendations, the NAO says HMRC should make payment plans more automated and efficient, including predictive modelling, digital self-service and automated responses to missed payments or asset disposals. It also recommends reducing inefficiency in debt management, managing the risks of a new case management system and updating HMRC’s plans for handling tax debt in a crisis (NAO report summary).

These are recommendations, not new rules. If HMRC follows them, a client who misses a payment, or who falls behind on a plan, could hear from HMRC sooner as more of the process is automated. Either way, the NAO’s figures show that debt left to age is the hardest to deal with.

What can a client do if they cannot pay HMRC on time?

GOV.UK says that if you cannot pay a tax bill in full, you may be able to set up a payment plan to pay it in instalments, and that HMRC will check whether the plan is affordable. If a plan cannot be agreed, HMRC will ask for the full amount (GOV.UK, If you cannot pay your tax bill on time).

The other route is to pay HMRC in full and spread the cost with a lender. That can make sense when a business wants to keep its record with HMRC clean, when a plan would not be agreed on the terms needed, or when the bill is part of a wider funding need. It is usually more expensive than a payment plan, so the choice depends on the client. Our guide to funding Corporation Tax, VAT and partners’ tax compares loans with HMRC payment plans.

Clients under pressure from HMRC can also be slower to pay their own professional fees, which feeds straight into the practice’s lock-up. Our guide to reducing lock-up explains how to measure it and bring it down, and aged debt and lock-up finance can release cash tied up in unpaid fees.

What about the practice’s own tax bills?

Accountancy firms have tax bills of their own. Partners in a partnership or LLP, and sole practitioners, face Self Assessment payments on account on 31 January and 31 July, each half of the previous year’s tax (GOV.UK, payments on account). In January that payment usually arrives with the balancing payment for the year before, which makes it the heaviest cash month for many partners.

Most firms meet this from tax reserves held back from drawings. Where reserves fall short, partners’ tax funding can spread the bill over the following months, and incorporated practices can do the same with Corporation Tax and VAT funding. The tax bill funding calculator shows what spreading a bill could cost each month.

What does it mean for your practice’s funding, and what should you do next?

Lenders on our panel publish tax, VAT and PII funding at 8.9% to 22% a year. These are indicative published ranges from October 2026, and your rate depends on your circumstances.

• Agree the firm’s January figure with the partners now, rather than in the week it is due.
• Check lock-up, because clients struggling with HMRC are often the slowest payers.
• If funding may be needed, have recent management accounts ready. Our guide to preparing a practice finance application lists what lenders ask for.

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Published 26 October 2026. Figures and dates are taken from the sources named and were correct on that date. This article is for general information only and should not be treated as legal, tax, accounting or financial advice. Funding availability and lender requirements depend on individual circumstances.