Given the increase in costs reported by the NAO, we asked HMRC what progress it had made on its key strategic measure to reduce the cost of running the tax system. HMRC said the increase in its costs since 2019–20 had been broadly the same as the increase in tax revenue. It said that in 2019–20, it faced two unsustainable structural funding gaps: a reduction in its compliance staffing; and under–investment in its IT function. The 2020 and 2021 Spending Reviews provided HMRC with funding to address both issues. HMRC also told us that it faces an underlying upward pressure as 5 Costs reallocated to HMRC’s operational and policy business groups. 6 C&AG’s Report, paras 2.12–2.13 7 C&AG’s Report, para 1.9 and Figure 5 8 C&AG’s Report, paras 6, 2.5, 3.3 9 For most taxes, the number of taxpayers for 2023–24 is not yet known. C&AG’s Report, para 1.12 and Figure 1. 10 C&AG’s Report, paras 1.18, 2.3 9 the number of taxpayers in the system is increasing.11 The number of Income Tax payers had increased by 14% from 31.7 million in 2020–21 to 36.2 million in 2023–24. The increase was due to the freezing of Income Tax thresholds since April 2022 and population and employment growth.12 The Office for Budget and Responsibility estimates that threshold freezes could take the number of taxpayers above 40 million by 2027–28.13