Budget 2025: Closing the gap – the Government’s bold push on tax compliance, avoidance and evasion

The Chancellor’s Budget makes one thing unmistakably clear: the era of gentle nudges is over. The Government is moving to sharpen HMRC’s enforcement tools, boost its investigative capacity and close long-standing gaps that allow tax to go unpaid.

From a US-style whistleblower reward scheme, to expanded criminal teams, and new powers aimed at advisers, this Budget represents one of the more assertive compliance pushes in recent years.

Key Budget Announcements on Tax Compliance and Closing the Tax Gap

A strengthened “whistleblower” reward scheme (effective immediately)

• • The UK is adopting a more US-style approach to incentivising informants. HMRC can now pay up to 30% of the tax recovered in cases where more than £1.5 million would otherwise have gone unpaid. This is designed to encourage high-quality, high-value intelligence on avoidance and evasion.

Major investment in HMRC’s debt recovery capability

• • Over the next five years, the Government will invest:
    • £64m in partnerships with private debt collection agencies; and
    • £89m to recruit additional HMRC staff dedicated to tax debt recovery.

350 new criminal investigators focused on small business fraud

• • • HMRC’s Fraud Investigation Service will deploy a new team targeting the most serious fraud and evasion among small businesses – a clear sign that criminal enforcement is expanding beyond the usual “big case” suspects.

New powers to pursue promoters of avoidance (Finance Bill 2025–26)

• • • Further clampdowns on avoidance scheme promoters are coming, with legislation expected next year and a consultation on additional measures in early 2026.

Sanctions on tax advisers who facilitate non-compliance (from April 2026)

• • • Enhanced powers and penalties aimed at advisers will be legislated for in the Finance Bill 2025–26. This formalises HMRC’s increasingly assertive approach to professional accountability.

Clarifying the tax treatment of image rights (from April 2027)

• • • From 2027, image rights payments linked to employment will be taxed as employment income, subject to Income Tax and NICs. This is especially relevant to sportspeople and entertainers – and the advisers and structures around them.

A new criminal offence for “reckless” evasion (consultation in 2026)

• • • The Government plans to introduce a recklessness-based criminal offence for direct taxes, mirroring existing VAT offences. This potentially lowers the threshold for criminal liability.

International cooperation on real estate data (from 2029/30)

• • • The UK intends to join an international agreement enabling the automatic exchange of information on real estate ownership, targeting cross-border evasion linked to property.

Loan Charge settlement opportunity (Finance Bill 2025–26)

• • • A new settlement route will be offered to those affected by the loan charge, giving individuals an avenue to regularise their position after years of uncertainty.

Modernisation of HMRC’s penalties regime

• • • HMRC’s inaccuracy and failure-to-notify penalties will be updated, signalling a more streamlined (and potentially more assertive) system.

What this Means for Clients

Stronger incentives for whistleblowers changes the dynamics

With rewards up to 30%, disgruntled employees, joint venture partners, former advisers (and even former lovers) may be more willing to report perceived non-compliance. Even if the allegation is weak, it may be enough to trigger an enquiry.

Clients should review governance processes, decision trails, documentation, and communication around complex structures.

More exposure for advisers – more caution for clients

HMRC’s focus on adviser sanctions means clients must choose their advisers carefully. Some firms will retreat from contentious tax work; others will become more risk-averse.

Our view: good advisers who understand HMRC procedure and litigation risk will become even more valuable.

Sport, media and entertainment clients face specific impacts

The new image-rights rules will reshape how clubs, agents, artists and athletes structure their affairs. Clients in these sectors should begin planning now even though changes start in 2027, as some arrangements may require renegotiation or restructuring.

International families and property owners: more visibility, more data sharing

The global exchange of real estate information will give HMRC far greater visibility into property holding structures. Ensuring that reporting aligns with reality before the data starts flowing, will be essential.

Final Thoughts

The Budget is not just rhetoric; it gives HMRC money, people and powers. With new investigators, expanded debt recovery teams, and a revamped informant reward system the practical effect for clients is simple: expect more enquiries, earlier interventions, and stronger pushes for recovery of tax and penalties.

When HMRC expands its enforcement footprint, compliant clients often get caught up in overly broad data sweeps or algorithm-driven risk flags. This makes it more important than ever for clients to take a proactive approach to tax risk management to avoid unnecessary escalation.

HMRC are being resourced and empowered to adopt a harder, more interventionist approach, but this environment is manageable with the right support. Proactivity, strong documentation and early strategic advice can defuse issues before they take hold.