HMRC Digital Services: New Updates for UK Taxpayers

HM Revenue and Customs (HMRC) is the UK government department responsible for collecting taxes, administering benefits such as Child Benefit, and enforcing customs rules. HMRC serves more than 35 million individual taxpayers and millions of businesses across the United Kingdom. Since 2025, HMRC has accelerated a nationwide digital transformation programme designed to move most taxpayer interactions online. This article explains the current state of HMRC’s digital services, the legal requirements now in force, and the practical changes affecting individuals, landlords, sole traders, and tax agents.

What Is HMRC’s Digital Transformation Programme?

HMRC’s Transformation Roadmap is a five-year government plan, published in July 2025, that sets out how HMRC will digitise tax administration, close the tax gap, and modernise its IT systems by 2030. The programme covers customer service, compliance enforcement, and infrastructure reform across every major tax type.

The Transformation Roadmap was first published by HM Treasury and HMRC in July 2025. A progress update was released on GOV.UK in July 2026, confirming that 78% of customer interactions with HMRC now take place through digital or automated self-service channels, compared with around 65% in 2020 to 2021. HMRC’s stated ambition is to raise this figure to at least 90% by 2030. The department has also confirmed that its technical health maturity score, measured against Gartner’s PAID model, stands at 3.3 out of 5, with a target of 4.0 by 2030. This transformation affects three groups directly: individual PAYE taxpayers, self-employed sole traders and landlords, and professional tax agents who file on behalf of clients.

Why the Programme Was Introduced

HMRC introduced the Transformation Roadmap to reduce the tax gap, defined as the difference between tax owed and tax collected. The most recent tax gap estimate, published in June 2026, stands at 6.4% for the 2024 to 2025 tax year, equivalent to £59.2 billion. This figure remains below the 7.5% recorded when measurement began in 2005 to 2006. Digitalisation is one of four strategies HMRC uses to close this gap, alongside stronger compliance enforcement, fraud investigation, and higher standards for tax advisers.

What New Features Has HMRC Added to the Personal Tax Account?

HMRC has added a clear timeline of tax events, an enhanced view of income sources, income tax estimates, plain-English tax code explanations, and untaxed savings interest details to the Personal Tax Account since April 2025. Nearly 20 million people used the Personal Tax Account during the 2025 to 2026 tax year.

The Personal Tax Account is the online portal where individuals view and manage PAYE tax records, tax codes, employment history, and benefit claims. During 2025 to 2026, 19.7 million people used the Personal Tax Account, and a separate Business Tax Account was used by 10.8 million businesses to check tax information and update records. HMRC redesigned the P2 tax coding notice, the official letter explaining what makes up a person’s tax code, to include personalised calculations showing how changes affect take-home pay. HMRC has also introduced a new online service for all 35 million PAYE taxpayers, giving direct access to check allowances, deductions, and report income changes without contacting HMRC by phone or post.

Planned Personalisation Upgrades for 2026 to 2027

HMRC is modernising the Personal Tax Account design throughout 2026 to 2027. Related tasks, taxes, benefits, and support content will be grouped by service rather than displayed as separate disconnected pages. The redesigned service is being built to meet current accessibility standards, including compliance with the Public Sector Equality Duty and Welsh Language provisions.

What Is Making Tax Digital for Income Tax and Who Must Comply?

Making Tax Digital (MTD) for Income Tax is a legal requirement, introduced in April 2026, for sole traders and landlords with qualifying income above £50,000 to keep digital records and submit quarterly updates to HMRC using compatible software. More than 350,000 businesses had signed up as of mid-2026.

MTD for Income Tax replaces the traditional single annual Self Assessment return with four quarterly summary reports plus a final end-of-year declaration. HMRC first launched Making Tax Digital for VAT in 2019, which now covers more than 2 million VAT-registered businesses. HMRC’s evaluation of MTD for VAT found that digital record-keeping increased taxpayer confidence, reduced errors, and saved businesses between 26 and 40 hours per year on average.

The first mandatory quarterly update deadline under MTD for Income Tax fell on 7 August 2026. HMRC directly notified more than 864,000 sole traders and landlords whose qualifying income from self-employment and property exceeded £50,000, based on figures from their 2024 to 2025 Self Assessment returns. The annual Self Assessment tax return for the 2025 to 2026 tax year remains due on 31 January 2027 and continues to run alongside the new quarterly reporting cycle.

Expansion Timeline for Lower-Income Taxpayers

MTD for Income Tax will expand in two further phases. Sole traders and landlords with qualifying income above £30,000 must join from April 2027. Those with income above £20,000 must join from April 2028. Each phase brings a larger population of taxpayers into mandatory digital record-keeping, following the same model used for the £50,000 threshold group.

How Quarterly Reporting Works in Practice

Taxpayers under MTD must record income and expenses digitally throughout the year using HMRC-recognised software, rather than compiling paper receipts once annually. Each quarter, the software submits a summary of business income and expenditure directly to HMRC. HMRC has built an “Assist” nudge functionality into the MTD service, which flags likely errors to taxpayers before submission, based on patterns in third-party data HMRC already holds.

How Has the HMRC App Changed for Taxpayers?

The HMRC app reached 7.6 million unique users during 2025 to 2026, up from 5.9 million the previous year, and processed £818.8 million in Self Assessment payments in January 2026 alone, compared with £499 million in January 2025. HMRC is targeting 10 million unique app users by March 2027.

The HMRC app allows taxpayers to check tax codes, view National Insurance records, claim tax refunds, make payments, and access their National Insurance number without contacting HMRC by phone. In January 2026, around 3 million customers used the app more than 15 million times combined. HMRC has run a national marketing campaign called “You’re on it,” which expanded its target audience from 18-to-34-year-olds to include 35-to-65-year-olds, now reaching an estimated 97% of UK adults. The campaign encourages young people and new employees to download the app and store their National Insurance number in a digital phone wallet.

What Digital Improvements Support Self Assessment Customers?

HMRC introduced a faster online service to close Self Assessment records, an improved digital appeals service that reduces paper use, and a unified registration service that pre-populates customer details and confirms registration by email and text. These services entered private beta testing during 2025 to 2026.

Previously, closing a Self Assessment record required separate manual processes that caused delays for customers who stopped being self-employed or no longer met the filing threshold. The new digital closure service allows customers to end their obligation more quickly. The improved appeals service replaces paper-based penalty appeals with an online process designed to speed up decisions. From late 2026 into 2027, HMRC will roll out a service that lets customers who already hold a Unique Taxpayer Reference (UTR) rejoin Self Assessment without completing the full registration process again, reducing delays in reinstating records.

National Insurance Refunds and Time to Pay

HMRC has also improved how it administers National Insurance contribution (NIC) refunds, an area that previously caused delays for both employers and employees. A new solution now supports employers processing refunds for multiple employees simultaneously, and HMRC is developing a dedicated digital refund service for individuals. Separately, an improved digital Budget Payment Plan service allows customers to set up regular automated payments toward future tax bills, reducing the risk of unexpected year-end liabilities. Customers experiencing financial difficulty can now access online Time to Pay arrangements tailored to their individual ability to pay, rather than relying solely on telephone negotiation.

How Is HMRC Using Artificial Intelligence in Its Digital Services?

HMRC has issued more than 28,000 Microsoft Copilot licences to staff, deployed an AI-powered digital assistant called “Ask HMRC” that logged 6.3 million interactions during 2025 to 2026, and plans to expand Copilot access to 50,000 colleagues during 2026. This is one of the largest AI rollouts in the UK government.

HMRC uses artificial intelligence in three main areas: customer-facing support, internal staff productivity, and compliance risk assessment. The “Ask HMRC” digital assistant helps taxpayers navigate tax rules and complete online tasks. HMRC has also piloted AI-generated call summarisation, which automatically drafts notes from customer service calls to save adviser time while keeping a human reviewer in the process. On the compliance side, HMRC is testing AI tools to identify fraudulent documents and analyse structured data across multiple tax years, entities, and returns to detect inconsistencies more efficiently than manual review.

HMRC has also contributed to GOV.UK Chat, the UK government’s first cross-government generative AI chatbot, developed with the Government Digital Service to answer citizen queries using content drawn from across GOV.UK.

Safeguards Applied to AI Deployment

HMRC states that its AI systems are deployed under established ethical and safety controls aligned with government-wide AI, technology, and accessibility frameworks. Compliance decisions involving AI tools continue to require a trained caseworker to make the final determination, rather than relying on automated output alone.

What Changes Affect Child Benefit and PAYE Customers?

HMRC now allows eligible customers to pay the High Income Child Benefit Charge directly through their PAYE tax code instead of filing a Self Assessment return, and has automated straightforward Child Benefit claims for faster decisions. A claim-tracking service is scheduled for delivery between 2026 and 2027.

The High Income Child Benefit Charge applies to households where one partner has an adjusted net income above a set threshold and the household receives Child Benefit. Previously, paying this charge required registering for Self Assessment even for taxpayers with no other reason to file. The new PAYE-based payment option removes this administrative step for eligible customers. HMRC has also introduced a fully digital service allowing Child Benefit customers to update a child’s education status online and has improved detection of duplicate claims where more than one person claims Child Benefit for the same child.

PAYE Tax Code Accuracy Improvements

HMRC is updating how it calculates tax codes for individuals who start receiving an occupational pension. Previously, new pension income was typically taxed using a Week 1 or Month 1 code, which does not account for a person’s total annual income and can cause incorrect deductions. Updated systems will calculate tax on a cumulative basis using total income to date, improving accuracy and reducing the number of customers who need to contact HMRC to correct their tax code.

What Digital Services Are Available for Small Businesses and Tax Agents?

HMRC launched a single digital front door for tax adviser registration in May 2026, made adviser registration mandatory from that date, and introduced new functionality letting customers authorise multiple agents for different aspects of their Making Tax Digital obligations. HMRC also published its Strategic Approach to Third-Party Software in March 2026.

Tax agents, meaning accountants and bookkeepers who file returns on behalf of clients, gained new routing options on HMRC’s Agent Dedicated Line, including escalation to the Personal Tax Query Resolution Service when standard channels cannot resolve an issue. HMRC completed testing of Multi-Factor Authentication for tax advisers to strengthen digital identity security, with full rollout expected by late 2026 to 2027. Small businesses gained visibility of VAT Payment on Account schedules within their Business Tax Account, allowing them to view instalment schedules and VAT registration details online rather than through paper correspondence.

Software Standards and E-Invoicing

HMRC published a Plan to Strengthen Standards for Third-Party Software in March 2026, alongside guidelines on the responsible use of generative AI within tax software products. Separately, the UK government has committed to mandating e-invoicing for all VAT invoices from April 2029. HMRC is working with the Department for Business and Trade to publish a detailed e-invoicing implementation roadmap at Budget 2026.

How Is HMRC Making Its Digital Services More Accessible?

HMRC made approximately 4,000 updates to its GOV. UK guidance during 2025 to 2026, helped around 2 million more customers self-serve, launched the Tax Confident education hub in March 2026, and extended voice biometric identification across all speech-enabled phone lines. A further 4,000 guidance updates are planned for 2026 to 2027.

Not every taxpayer can complete tax tasks digitally. HMRC’s Voluntary and Community Sector Programme supported more than 40,000 customers during 2025 to 2026 through grant funding exceeding £11 million, targeted at people who are digitally excluded or in vulnerable circumstances. Customers calling HMRC helplines in 2025 to 2026 experienced faster answer times than the previous year, with more than 8 in 10 calls answered. HMRC met its service standard of responding to 80% of correspondence within 15 working days in all but one month since August 2025.

Voice biometrics technology, which allows customers to use a unique voice recording instead of a password, is now offered to all individual customers contacting speech-enabled phone lines. HMRC is also piloting GOV.UK One Login, a single sign-in and identity verification system. All new individual customers without an existing Government Gateway account now use GOV.UK One Login, with existing account holders expected to transition from 2027, and agents and organisations transitioning by 2030.

What Are the Risks and Implications of HMRC’s Digital Transformation?

Digital-by-default communication, expanded third-party data sharing, and AI-supported compliance checks mean taxpayers face greater scrutiny of inconsistencies between returns, accounts, and other data sources, with HMRC targeting £50.4 billion in compliance yield for 2025 to 2026. Legislation now permits HMRC to switch eligible customers to digital communication by default.

HMRC has legislated a “Digital by Default” model for outbound communications, meaning customers using HMRC’s digital services will automatically receive digital correspondence unless they actively opt out. HMRC’s long-term goal is to cut postal correspondence volume by approximately 75%, saving an estimated £50 million per year by 2028 to 2029. New third-party data reporting obligations on financial account information and card sales take effect from the 2027 to 2028 tax year, increasing HMRC’s ability to cross-check taxpayer submissions automatically.

Compliance enforcement has also expanded alongside digital services. HMRC recruited more than 2,100 additional compliance officers during 2025 to 2026, working toward a target of 5,500 by 2029 to 2030. Interest rates and penalties on overdue tax debts increased from 6 April 2025 to remove incentives for late payment. Government measures certified by the Office for Budget Responsibility are projected to raise £10 billion in additional annual tax revenue by 2029 to 2030.
Explore More about Business:
Greggs Share Price: Analysis, Trends and Market Insights
Grant Thornton CBIZ Deal: Benefits, Risks & Outlook

What Digital Changes Are Coming Next for UK Taxpayers?

Upcoming changes include a digital Inheritance Tax service from 2027 to 2028, mandatory e-invoicing for VAT from April 2029, in-year PAYE payments toward forecast Self Assessment liabilities from April 2029, and continued expansion of Making Tax Digital to lower-income sole traders and landlords through 2028. HMRC is also digitising more than 100 remaining paper forms.

HMRC plans to replace the current manual, paper-based Inheritance Tax process with a digital service from 2027 to 2028, developed with input from executors, agents, and trustees. A new Digital Disclosure Service, targeted for 2027 to 2028, will allow customers and their agents to disclose errors and pay liabilities and penalties across all taxes and duties in one online system. From April 2029, Income Tax Self Assessment customers with PAYE income will be required to pay more of their forecast tax liability during the year through PAYE, spreading payments into smaller, regular amounts rather than one large annual bill.

The Valuation Office Agency, which maintains Council Tax bands for 27 million homes and business rates for 2.1 million commercial properties, integrated into HMRC in April 2026. It is targeting resolution of over 70% of business rates challenges within 12 months by March 2027, rising to 90% by December 2027, alongside a modern Valuation Operating System designed to replace ageing IT infrastructure. Taken together, these developments confirm that HMRC’s shift toward a digital-first tax administration will continue accelerating through the remainder of the decade, with quarterly digital reporting, AI-assisted compliance checks, and default digital communication becoming standard features of the UK tax system rather than optional add-ons.