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Friday, Jul 11, 2025

Labour's Tax Crackdown: Boosting HMRC to Fund NHS and School Breakfast Clubs, Raising £5.1bn Annually

Labour plans to fund policies on the NHS and school breakfast clubs by increasing tax collection efforts, promising up to £555m for officials.
This is expected to raise £5.1bn annually.

Rachel Reeves, the shadow chancellor, accused the Conservatives of failing to address tax dodging.

The Conservatives introduced 200 measures to combat tax non-compliance, but the Labour Party cannot yet specify how they will fund their promises without raising taxes.

Labour had previously planned to pay for these pledges by replacing the UK's non-dom tax regime.

The UK government is planning to change tax rules for non-domiciled individuals, who live in the UK but pay taxes in their home country, to fund a cut to National Insurance.

This move has raised questions for the Labour party, which has a self-imposed rule against borrowing for day-to-day spending.

In response, Labour's Shadow Chancellor, Rachel Reeves, has proposed an alternative plan to increase tax collections.

According to Labour, the tax gap between what is owed and what the government collects was £36bn in the 2021/22 financial year.

The Labour party proposes increasing funding to tackle tax evasion and fraud by investing £555m in hiring more tax officers and digitizing the tax office.

This approach is estimated to raise £5.8bn annually by the end of the parliament.

The National Audit Office head suggested the government could save £6bn yearly by addressing tax evasion and avoidance.

Labour aims to provide HMRC with the necessary resources to investigate tax evaders and modernize the tax office.

HMRC has been calculating the tax gap since 2005.

The text discusses the reduction of the gap between the UK's tax revenue and spending, which has fallen from 7.5% in 2005 to 4.8% in 2021/22.

The Labour party supports the proposed replacement of non-dom rules but suggests strengthening it by including foreign assets held in trust within UK inheritance tax and removing a 50% discount in the first year of the new rules.

These changes could bring in £1bn in one year and £2.6bn over the next Parliament.

The Liberal Democrats believe these changes are not enough and have proposed fully-costed plans to fund care for everyone.

It's common for governments to announce plans to increase revenue by reducing tax avoidance or evasion.

The text discusses the UK government's plan to increase corporation tax to help pay for COVID-19 recovery efforts.

However, the author notes that the Office for Budget Responsibility has expressed uncertainty about how much revenue this measure will actually generate and how quickly it can be brought in.
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