For many UK businesses, 2025 has brought more financial challenges than clarity.

With tax arrears reaching unprecedented levels and additional cost pressures on the horizon, it’s becoming increasingly difficult for firms to stay ahead of their obligations.

According to recently released figures from HM Revenue & Customs (HMRC), arrears across key business taxes, including Corporation Tax, VAT and PAYE, have reached an average of £28 billion per month in the first quarter of the year.

This is a clear strain on the tax system and serves as a warning sign for businesses facing mounting liabilities.

A closer look at the numbers

The breakdown from HMRC has revealed the following about the growing debt:

• Corporation Tax arrears came in at £7.52 billion in January, slightly easing to £6.79 billion by March
• VAT debt consistently hovered around £12 billion per month, peaking at £12.55 billion in February
• PAYE and employer National Insurance contributions averaged over £8 billion monthly

The pressure is likely to increase further.

From April, employer NICs rose from 13.8 per cent to 15 per cent, alongside a drop in the contribution threshold.

This means many businesses will see their liabilities grow. just as cash reserves are already under strain from global trade disruptions and rising input costs.

The real-world impact of tax arrears

Falling behind on tax is rarely the result of one bad decision. It is often the consequence of delayed payments, unforeseen cost spikes, or a gradual erosion of working capital.

Late payments to HMRC can trigger:

• Interest charges that build quickly
• Penalties for non-compliance
• Enforcement action, including distraint or winding-up petitions
• Deterioration in lender and supplier confidence

Left unaddressed, even modest arrears can spiral, especially in a landscape where cash flow is already under pressure.

Strategies to stay in control

Despite the challenges, businesses are not without options. There are steps that can help reduce exposure and build financial resilience:

• Refine cash flow planning, particularly around tax dates and payroll schedules
• Strengthen real-time reporting to spot risks and respond early
• Engage proactively with HMRC. Time to Pay arrangements can be negotiated before enforcement begins
• Review overheads and working capital to identify opportunities for savings or restructuring

Even businesses in temporary distress may find that timely, structured planning can prevent long-term consequences.

We work with businesses of all sizes to review tax positions, resolve arrears, and put systems in place to avoid recurrence.

Don’t let growing tax obligations threaten your stability. Contact our team today and put a plan in place before the pressure builds further.