Elbruz Consulting

UK Tax Gap Reaches £46.8bn as Government Plans Stronger Compliance and Digital Reforms

The UK tax gap, the difference between what people and businesses are supposed to pay and what actually gets collected, was 5.3% (£46.8 billion) for 2023–24, according to new HMRC figures released on 19 June 2025. While HMRC collected an impressive £829.2 billion, small businesses made up the largest share of unpaid tax (60%), and corporation tax accounted for 40% of the gap. The main reasons behind this shortfall include mistakes, people not taking enough care with their taxes, and outright evasion.

To tackle this, the government plans to bring in an extra £7.5 billion by cracking down on non-compliance and modernising the tax system. Treasury minister James Murray MP stressed that every pound of uncollected tax puts a heavier burden on honest taxpayers and starves public services of vital funds. To strengthen enforcement, HMRC will receive £1.7 billion over four years to hire 5,500 compliance officers and 2,400 debt collection staff.

Technology will also play a big role in closing the gap. HMRC’s Making Tax Digital (MTD) programme, already reducing VAT errors, is expected to add £4 billion in extra tax revenue by 2030. MTD for Income Tax, launching in April 2026, is set to raise another £1.95 billion. Together with measures from the 2024 Autumn Budget and 2025 Spring Statement, these steps aim to ensure everyone pays their fair share.
Source: HMRC

Families to Shoulder Tax Burden on Inherited Pensions from 2027

Starting in April 2027, bereaved families, not pension providers, will be responsible for reporting and paying inheritance tax (IHT) on inherited pensions, and they’ll have just six months after a loved one’s death to do it. The government says this change follows strong feedback during its consultation, but personal finance experts warn it will make life harder for families already dealing with grief. Former pensions minister Sir Steve Webb described the rules as “horribly complicated” for executors, even if they remove administrative burdens from pension schemes.

These reforms are part of Chancellor Rachel Reeves’ plan to raise an extra £1.5bn a year for the Treasury by 2030 by including pensions in inherited estates. Around 1.5% more estates will face IHT under the new system, in addition to the 4% already above the £325,000 nil-rate band (which can rise to £500,000 if a home is inherited). Things get even tougher if the pension holder dies after 75, beneficiaries could face both inheritance tax and income tax, with some paying an effective rate of up to 67%. Pensions left to spouses or civil partners will remain tax-free, and death-in-service benefits are excluded, offering some relief.

The changes have sparked criticism from the financial industry, which had proposed simpler alternatives, such as a single flat-rate tax on inherited pensions. Combined with the removal of the lifetime allowance in 2023, these new rules mark a turning point in how wealthier individuals plan their retirement and pass on savings to their families.

UK Signs MoU with OpenAI to Boost AI Investment and Public Sector Innovation

The UK government has taken another big step into the world of artificial intelligence by signing a memorandum of understanding (MoU) with OpenAI. The move is part of a wider strategy to attract AI investment and weave AI-powered tools into public services. As part of this collaboration, OpenAI is expected to grow its London presence and explore opportunities in the government’s designated AI Growth Zones, outlined in its Compute Strategy. While the MoU isn’t legally binding, it signals a clear intent from the government to strengthen the UK’s position as a global leader in AI innovation, built on democratic values and cutting-edge technology.
This agreement builds on the UK’s increasing use of AI across government services. Tools like ‘Consult,’ powered by OpenAI’s GPT-4o, are already helping civil servants summarise thousands of public consultation responses. Another tool, ‘Redbox,’ uses AI to draft and summarise official documents, forming part of the broader ‘Humphrey’ AI suite designed to improve efficiency and cut reliance on external contractors. Civil servants can pick from leading AI models, OpenAI’s GPT-4o, Google’s Gemini, or Anthropic’s Claude, depending on the task, though the most sensitive information, like data classified as Secret or Top Secret, remains off-limits.
The deal with OpenAI follows similar MoUs with other tech giants, including Anthropic and Google Cloud, all aimed at modernising public sector systems and supporting the UK’s growing startup ecosystem. However, some critics argue that these voluntary agreements rely too heavily on US-based companies and have yet to deliver major direct investments in the UK’s AI infrastructure.
Despite the criticism, the UK government is doubling down on its AI ambitions. Peter Kyle, Secretary of State for Science, Innovation, and Technology, has been actively engaging with global tech leaders, promising fair opportunities for homegrown companies while championing AI as a tool for economic growth and better public services. With initiatives like this, the UK is working to cement its reputation as a global hub for AI development and innovation.
Source: ITPro

UK to Force Big Companies to Disclose Supplier Payment Times in New SME Strategy

The UK government plans to require large companies to disclose how long they take to pay suppliers as part of a new strategy aimed at supporting small and medium-sized enterprises (SMEs). Business secretary Jonathan Reynolds will outline the strategy in August, which will include measures such as mandating companies with over 250 employees to report payment performance in their annual reports. Audit committees will also be tasked with ensuring that boards and management address late payment practices. The move follows draft legislation, the “Companies (directors’ report payment reporting) regulations 2025,” which is expected to be debated and approved in autumn.
Late payments have long been a challenge for SMEs, with research from the Federation of Small Businesses indicating that more than half of small firms experience payment delays, sometimes waiting months or resorting to loans to maintain cash flow. By requiring disclosure in annual reports, ministers aim to create greater transparency and put public pressure on companies to pay suppliers promptly. Initiatives like “Good Business Pays,” launched in 2021, have already pushed for better payment practices, and the proposed reforms are expected to reinforce these efforts.
The broader small business strategy will also introduce a “business growth service,” consolidating existing public sector support such as the Export Academy and Help to Grow scheme. Additionally, the government plans to address banks’ frequent use of personal guarantees for small business loans, seeking to reduce the risks posed to entrepreneurs' personal assets without imposing a complete ban.

How AI is Changing the Face of Accountancy 🤖💼
The world of accountancy is no longer just about balancing books or filing tax returns. With the rise of Artificial Intelligence (AI), the profession is undergoing a massive transformation, making life easier for accountants and delivering greater value for clients.

Smarter, Not Harder ⚡
AI takes over time-consuming tasks like data entry, invoice matching, and bank reconciliation, the jobs that once ate up hours of an accountant’s day. With automation tools and smart software, accountants can now focus on analysis, strategy, and growth, rather than repetitive admin work.

From Numbers to Insights 📊
Modern AI tools don’t just process data, they interpret it. Machine learning predicts cash flows, highlights key trends, flags potential risks or fraudulent activity. This turns accountants into true business advisors, helping clients make data-driven decisions.

A Better Client Experience 🤝
Think chatbots answering quick tax questions or AI-driven dashboards offering real-time insights. Clients get faster, clearer answers, while accountants have more time to focus on big-picture strategies.

The Future is Collaborative 🌐
AI isn’t replacing accountants, it’s partnering with them. By handling the heavy lifting, AI allows accountants to do what they do best: problem-solving, strategic thinking, and guiding businesses toward growth.

How AI Helps?
🤖 Automation: Data entry, invoice matching & reconciliations are done faster.
⚡ Speed & Accuracy: Reduces errors and saves hours of manual work.
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🔍 Fraud Detection: Flags unusual transactions in real time.
💬 Better Service: Chatbots & dashboards give clients quick answers.

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