Criminals gain an average of 1,000 in credit or benefits
for each name they steal, according to the National Fraud Authority.
The NFA said more than 1.9 billion relates to the money criminals obtain using other people's identities, with the rest made up of the cost to about 1.8 million individuals and companies hit in preventing and detecting the crime and putting right the damage done.
The NFA said in very serious cases it could take people more than 200 hours to resolve the problems caused by identity fraud – the equivalent of a year's annual leave.
Identity fraud involves criminals using another individual's personal details to obtain goods and services, or take out credit or benefits in their name.
Stolen identities can also be used to commit other crimes, ranging from evading police to people trafficking and terrorism.
The figures, compiled for the first UK ID Crime Statistic Threat Assessment in conjunction with the National Fraud Intelligence Bureau, do not include losses as a result of people using fictitious identities.
Bernard Herdan, chief executive of the NFA, said: "Stolen and false identities are a significant enabler of crime and this issue demands a co-ordinated response across Government and the private sector.
"The work we've undertaken has allowed us to gain a better understanding of the issue of identity crime.
"We are now working actively with our partners to improve the UK's response to identity-related crime and help reduce its devastating impact."
The NFA said criminals often try to obtain genuine documents such as birth certificates, passports and driving licences.
But it warned that they look for other information that would help them steal someone's identity, such as utility bills, online passwords, account numbers and personal information that people post on social networking sites.
It comes as a separate survey published today by the UK's fraud prevention service CIFAS finds only seven per cent of people are completely confident companies they deal with are treating their data responsibly.
More than nine out of 10 people think they are at risk of identity fraud but only 44 per cent regularly check their bills and financial statements against receipts and only 55 per cent of people check before responding to emails and calls.
Only 56 per cent of British organisations have a comprehensive policy to help protect people's identities and 40 per cent of British employees believe identities could be obtained from company bins, the survey said.
It said that in the first nine months of this year, levels of identity fraud in the UK were up nearly 10 per cent on the same period last year.
The NFA is urging people to keep their identity safe by not throwing away anything with their name, address and financial details on it without shredding it. The group is also advising people to regularly check their bank statements and credit reference, and to make sure their computer has up-to-date anti-virus software.
It is also urging people to make sure they use all of the privacy settings available on social networking sites, and not to disclose too much personal information.
People should also get Royal Mail to redirect their post if they move house.
For more advice or to report fraud people can go to www.actionfraud.org.uk or call 0300 1232040.