Economic Crime Update: Budget 2025

Whistleblower rewards – changing incentives in high-value tax fraud cases

The Budget confirms a strengthened HMRC reward scheme for individuals who report serious tax evasion. More detail has since been provided in guidance, which extends the scheme to non-criminal tax avoidance. Where information provided leads to the collection of at least £1.5 million in unpaid tax, HMRC may pay a reward of between 15% and 30% of the tax collected (excluding penalties and interest). The scheme is aimed at large, complex cases – typically involving large companies, wealthy individuals, or offshore and avoidance structures – and rewards remain entirely at HMRC’s discretion.

Key features of the strengthened scheme include:

• Eligibility threshold – Rewards are only available where the information leads to the collection of at least £1.5 million in tax (excluding penalties and interest).
• Reward range – HMRC may pay between 15% and 30% of the tax collected. The precise level is determined at HMRC’s discretion, taking into account the usefulness and uniqueness of the information.
• Scope of cases – The scheme is focused on serious tax avoidance or evasion typically involving large corporates, wealthy individuals, offshore arrangements or avoidance schemes.
• Exclusions – No reward is available, among others, to civil servants (and those contracted to government) who obtained the information in the course of their duties, to those directly involved in planning or carrying out the wrongdoing, or to individuals required by law to disclose or not disclose the information. Anonymous reporters are not eligible for rewards, even though anonymous reports will still be accepted and treated confidentially.

The reporting process is routed through HMRC’s established “Reporting serious tax avoidance or evasion” channels, principally via an online form. Reporters are asked to provide:

• a description of the activity and how it amounts to serious avoidance or evasion;
• how they know about it and their relationship to the taxpayer or business;
• how long the behaviour has been taking place;
• the total or estimated value of the activity; and
• a description of any supporting information they hold or know about.

After a report is submitted:

• HMRC will acknowledge receipt but does not provide feedback or ongoing updates on investigations;
• tax investigations can take years to complete, and any reward may only be paid once the tax has been recovered;
• HMRC will contact the reporter only if more information is needed or if they are eligible for a reward.

The approach mirrors, to some extent, US-style incentives and has clear implications for corporate governance. More generous external rewards may increase the likelihood that concerns are raised outside the organisation where internal speak-up channels are perceived as ineffective, slow or unsafe. For large corporates, the scheme adds further weight to existing expectations that internal whistleblowing arrangements are accessible, trusted and demonstrably lead to action.

Consultation on lowered mental element for tax crime

The Budget also announces a consultation on a proposal for a new criminal offence in relation to evasion of direct taxes (corporation tax, income tax, capital gains tax). The proposed offence could be committed where the individual or company is merely reckless. This is a lower threshold than for most tax-related crimes, which typically require intention, dishonesty, or fraud.

Details will only be available when the Consultation is published. This is due to take place early next year. Although the proposed offence would be confined to tax, there is experience of offences first introduced in relation to tax then being rolled out more widely (notably, failure to prevent offences).

High street money laundering – a renewed focus on cash-intensive sectors

The Budget reiterates the government’s concern over cash-based money laundering, which remains a high-risk area with an estimated £12 billion of criminal cash generated annually - with businesses such as mini-marts, nail bars, and car washes highlighted as common vehicles for laundering illicit funds and evading tax according to the 2025 National Risk Assessment for AML and counter-terrorist financing. Planned actions include:

• The establishment of the High Streets Illegality Taskforce to coordinate intelligence-led interventions and bring together HMRC, law enforcement and local authorities.
• Additional funding for enforcement and data-sharing, supported by an uplift in the Economic Crime Levy.
• Development of an Anti-Money Laundering and Asset Recovery Strategy with private sector input.

In relation to tax fraud, a new dedicated small business evasion and enforcement team will be established, and 350 HMRC criminal investigators will be deployed to carry out more targeted criminal interventions, focusing on the most serious fraud and evasion by small businesses. This dovetails with the government’s emphasis on “everyday” fraud and local compliance risks across retail, hospitality and small-scale services – sectors repeatedly flagged in the Economic Crime Survey 2024 for inconsistent controls and under-reporting.

Tackling rogue directors

The government will invest £25 million over the next five years to recruit additional Insolvency Service staff, increasing the agency’s capacity to pursue director disqualification. It will also amend the Company Directors Disqualification Act 1986 to extend the circumstances in which directors who break the law can be disqualified. This will be legislated for in a future Finance Bill.

This aligns with the Insolvency Service’s recently published five-year enforcement strategy (2026–2031), which signals a shift from reactive insolvency regulation to proactive corporate enforcement and intelligence-led economic crime disruption. The agency is now positioning itself as a more assertive part of the enforcement ecosystem, particularly in areas involving phoenixing, false filings, abuse of corporate structures and Covid-loan misconduct.

Public sector fraud

The government will establish the Public Authorities Fraud Investigation and Enforcement Service by 2026–27. Its focus will include recovery efforts linked to pandemic-era losses, including misclaimed Covid loans and fraudulent PPE procurement.

The government notes that almost £400 million of Covid-related fraud and error benefits have been recovered to date, against a backdrop of £10 billion lost to pandemic-era fraud and flawed contracts, including £1.4 billion from failed PPE procurement.

Changes to the Economic Crime Levy

From April 2026, Economic Crime Levy bands will be re-based to reflect updated revenue thresholds, with higher charges for the largest AML-regulated entities but the overall model – a flat charge capped at 0.1% of UK revenue – remaining unchanged. The detailed bandings will increase the annual liability for some large firms, but there are no changes to the levy’s scope or administration.

Crucially, the Budget links the uplift in levy income to further funding for law-enforcement resource, technological capabilities and public-private data-sharing to target money laundering and high-street criminality. For most businesses, the operational impact will be limited to a higher annual charge and greater scrutiny of how AML controls contribute to system-wide risk reduction.

Practical implications and next steps

Businesses should take note of the following:

• Fraud and tax-evasion prevention frameworks: Align internal policies and monitoring systems with the government’s enhanced enforcement priorities, ensuring they address practical risks within local operations and high-risk functions.
• AML controls: Review risk frameworks for exposure to cash-intensive businesses and sectors flagged in the National Risk Assessment.
• Whistleblower policies: Consider whether internal reporting channels and protections are accessible, trusted and responsive, as external incentives may increase the likelihood of disclosures.
• Engagement: Monitor consultations on the forthcoming AML and Asset Recovery Strategy and consider contributing to shape policy.
• Governance: Ensure board-level awareness of levy changes and enforcement trends, as regulators continue to prioritise transparency and collaboration.

Conclusion

The Budget 2025 does not transform the UK’s economic crime landscape, but it reinforces the existing direction of travel: more proactive intervention in high-risk sectors, stronger incentives to share intelligence, rising expectations on corporate governance and continued investment in public-sector fraud capability. At the same time, the measures are incremental and uneven. While HMRC, Trading Standards, Border Force and the Insolvency Service all receive targeted increases in funding or new structures, there is no equivalent boost in core funding for specialist prosecuting agencies such as the SFO, which will be critical to sustaining a more robust enforcement agenda. The Anti-Corruption Strategy 2025, published shortly after the Budget, sets out more structural proposals but these will take time to implement.

Viewed against the scale of the problem – including an estimated £12 billion in criminal cash generated annually and billions lost to pandemic-era fraud – these changes are unlikely to materially shift the overall cost of fraud to the economy. There is a real risk that businesses will remain exposed to the threat of economic crime. In that environment, companies cannot assume that public-sector initiatives will protect them from harm: they need credible, well-documented procedures that prevent fraud, money laundering and tax evasion both for their benefit and against them, supported by effective whistleblowing channels and board-level oversight that keeps pace with a steadily hardening – but unevenly resourced – enforcement landscape.

Authored by Reuben Vandercruyssen, Liam Naidoo, Olga Tocewicz, Rupert Shiers, and Alex Cumming.