In 2025, HM Revenue & Customs (HMRC) has significantly intensified its tax compliance efforts across the United Kingdom. The main objective is to close the tax gap by reducing cases of tax avoidance, non-compliance, and errors in tax filings. In practice, this means an increased number of tax investigations, broader use of data analytics, and more direct communication with both taxpayers and advisors.
The UK government has allocated additional funding to HMRC to tackle tax fraud, incorrect claims, and misuse of reliefs such as R&D Tax Relief, SEIS, EIS, and property-related deductions. Advanced data-matching systems like HMRC’s Connect now combine information from over 30 external sources, allowing the authority to identify potential irregularities with greater precision.
HMRC’s compliance activity in 2025 is focused on high-risk sectors and taxpayer categories where underreporting and tax errors are most common. Key areas of focus include property income, Capital Gains Tax, crypto assets, self-employment income, and R&D claims made by innovative or tech-based companies. Many taxpayers are currently receiving so-called “one-to-many” (OTM) letters, encouraging them to review their filings and voluntarily disclose any discrepancies before formal action is taken.
This increased activity is part of HMRC’s long-term strategy known as “Closing the Tax Gap.” According to official reports, the UK’s tax gap remains above 5% of the total expected revenue — representing billions of pounds in lost taxes each year. To combat this, HMRC has expanded its use of automated compliance systems, enhanced data analytics, and increased collaboration with financial institutions, digital platforms, and cryptocurrency exchanges.
For tax advisors and accountancy firms, 2025 marks a year of heightened responsibility. HMRC is paying closer attention to the quality of tax documentation, accuracy of calculations, and compliance with Anti-Money Laundering (AML) regulations. Firms serving both individuals and corporate clients are expected to implement robust verification procedures for income sources, particularly in relation to international activities, cross-border transactions, and crypto investments.
Advisors are also encouraged to strengthen their internal compliance frameworks, maintain thorough records of client advice, and proactively assess potential tax risks. In case of a dispute, the quality of evidence and documentation can be decisive in determining the outcome of an HMRC investigation.
Technology plays an increasingly central role in HMRC’s tax enforcement strategy. The authority is now deploying artificial intelligence (AI) and machine-learning algorithms to detect tax avoidance patterns, monitor complex transaction flows, and analyze data across blockchain networks.
This means that taxpayers can no longer rely on the anonymity of digital transactions or undeclared gains from crypto or overseas platforms. At the same time, HMRC continues to develop the Making Tax Digital (MTD) program, aiming for full digitalisation of tax reporting and minimisation of manual entry errors.
Taxpayers should expect more frequent contact from HMRC in 2025 — not only through formal compliance checks but also through proactive educational and disclosure campaigns. The tax authority promotes a “low-penalty approach” for those who voluntarily correct mistakes, encouraging early disclosure to avoid higher penalties.
However, those who fail to respond to HMRC correspondence risk substantial financial penalties, potentially reaching 100% of the unpaid tax, and in serious cases, criminal proceedings.
HMRC’s compliance drive also coincides with renewed scrutiny of the non-domiciled (non-dom) regime. The UK government is considering further restrictions on tax benefits available to non-dom individuals, reflecting a broader move toward transparency and equal treatment of all taxpayers.
These reforms may have significant implications for international investors, expats, and high-net-worth individuals who have historically benefited from non-dom status. Tax planning strategies that were once standard practice may now require a full reassessment.
In 2025, tax compliance is not just a regulatory obligation but a fundamental aspect of financial and reputational risk management. For businesses and individuals alike, ensuring accurate reporting and maintaining a strong compliance culture are key to avoiding disputes and protecting long-term stability.
Tax professionals are increasingly expected to conduct regular risk reviews, internal audits, and implement monitoring tools that help ensure ongoing accuracy in filings. Transparent communication and maintaining contemporaneous evidence of tax positions are now essential components of best practice.
For self-employed individuals, freelancers, and small business owners, HMRC’s increased compliance activity means paying closer attention to record-keeping, timely submissions, and proper documentation of expenses. Every claim and deduction should be supported by clear evidence to withstand potential review.
Property investors and landlords face particular scrutiny, especially regarding undeclared short-term rental income (e.g. Airbnb) and capital gains from property disposals. Similarly, crypto investors should ensure they have declared all taxable gains, as HMRC continues to receive transactional data from major global exchanges.
Ultimately, 2025 is a year when every taxpayer — regardless of business size or income level — should treat compliance as a top priority. Being proactive, maintaining detailed records, and understanding HMRC’s investigative processes can help avoid significant financial and reputational consequences.
Magda Mikulska
Tax Adviser Wisetax Founder
