Budget: HMRC to set new ‘transformation roadmap’ and digitise inheritance tax


Fiscal event includes hundreds of millions of pounds of funding to upgrade both internal systems and citizen services, as well as plans for legislation to support greater use of tech

HM Revenue and Customs is soon to publish a new ‘Digital Transformation Roadmap’ and, in the coming years, will digitise more parts of the UK taxation system, yesterday’s budget revealed.

The public spending and departmental funding plans announced by chancellor Rachel Reeves (pictured above) include a 2025-26 settlement for HMRC of £6.7bn. This is comprised of a capital budget of £700m in addition to £6bn in operational funding – a rise of £800m compared with the current year and equivalent to a real-terms 4.5% increase compared with FY24, according to the government.

The budget also reveals that the tax agency will publish a new digital roadmap in spring of next year. In the years beyond, funding will be provided for various transformation and upgrade work covering both frontline citizen services and internal tech infrastructure.

Some £154m will be committed to “modernise” the IT system that currently supports the department’s debt-management operations.

A total £12m will be spent “to acquire further credit reference agency data to enable HMRC to better target their debt collection activities”, and £4m has been set aside “to enable HMRC to pre-populate self assessment tax returns with Child Benefit data to ensure the High Income Child Benefit Charge is accurately calculated and reported”.

A total of £16m will be invested in upgrades to the HMRC app that will “allow income tax self assessment taxpayers to make voluntary advance payments in instalments”. In the longer term, £52m will be committed to “digitalise the inheritance tax service from 2027-28 to provide a modern, easy-to-use system, making returns and paying tax simpler and quicker”.

The budget sets also sets out an intention to dedicate £36m “to modernise HMRC’s tax adviser registration services”. This tech upgrade will come alongside planned legislation that, from April 2026, will make it mandatory for advisers working with HMRC on behalf of customers to formally register with the department.


Budget 2024 HMRC tech funding

£6.7bn
Overall HMRC funding settlement for 2025/26

£154m
Modernising HMRC’s debt-management IT system

£16m
Upgrading HMRC App to enable voluntary ITSA payments

£52m
Digitising Inheritance Tax from 2027-28

£12m
Acquiring more data from credit reference agencies


Other tech-related programme, policy and legislative plans include a commitment to expanding the Making Tax Digital regime to include all income tax self assessment taxpayers with annual earnings of £20,000 and upwards. This extension will be completed by the next general election and the government “will set out the precise timing for this at a future fiscal event”.

A consultation will also be run early next year with the remit “to establish standards and increase the adoption of electronic invoicing”. From 6 April 2025, meanwhile, tax advisers filing repayment claims will be required to use advanced electronic signature technology.

Another consultation to be launched in the coming weeks will explore the potential for “modernising how HMRC acquires and uses third-party data to make it easier for taxpayers to get tax right first time”.

The investment plans set out in the budget are intended to support the department in “improving customer services”, with the aim of meeting performance targets that have consistently been missed in recent months, such as answering 85% of all phone calls to an advisor.

The overall aim is “transform HMRC into a digital-first organisation”, according to the red book.

“The government is also investing to enable the modernisation and reform of HMRC, improving the productivity and resilience of HMRC’s internal systems and improvements to the way customers engage HMRC, including through the HMRC App,” the document adds. “This is a settlement that properly funds HMRC, fixing the foundations and enabling the UK’s tax administration to generate the revenues necessary to support delivery of all five of the government’s missions and fund vital public services.”

Delivering the budget speech in parliament, Reeves said that the investments in HMRC would enable the department to collect billions in additional revenue.

“Before a government could consider any change to a tax rate or threshold it must ensure that people pay what they already owe,” she said. “So we will invest to modernise HMRC’s systems using the very best technology and recruit additional HMRC compliance and debt staff.  We will clamp down on those umbrella companies who exploit workers, increase the interest rate on unpaid tax debt to ensure that people pay on time, and go after promoters of tax avoidance schemes. These measures to reduce the tax gap raise [will] £6.5bn by the end of the forecast.”

Sam Trendall

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