Chief executive reveals that the tax department begins a major £1.6bn programme of upgrade work from a position that is less than acceptable and well below what is considered ‘ideal’

A major HM Revenue and Customs programme to remediate legacy IT aims to drive the department’s technical health score from its current level of 3 out of 5 up to a rating of 4 – which is considered “acceptable”.

In a letter to parliament’s Public Accounts Committee, the tax agency’s chief executive John-Paul Marks provided MPs with details of HMRC’s five-year plan to replace – or otherwise mitigate the risks of – ageing systems, as well as the projected costs and benefits of the programme.

As of the start of the 2025/26 year, the department begins the initiative with health rating of 3 – on a five-point scale, where a score of 5 is ‘ideal’ and 4 is ‘acceptable’. The intention is to increase the score to 3.2 in the current year, and then by a further fifth of a point in each of the next five years, before finally reaching the target score of 4 in 2029, according to Marks’ missive.

“‘Technical health’ is defined as the strength of HMRC’s ongoing relationship with its technology estate,” he wrote. “Poor technical health increases the risk of service failure, security breaches, and operational inefficiencies.”

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The current below-acceptable score reflects the current landscape in which “we have an extensive digital estate, which includes a number of legacy IT systems that no longer meet modern standards for performance, security, scalability, or maintainability”, Marks added.

HMRC’s three-year settlement awarded in the Spending Review earlier this year provided £1.6bn to help the department address “modernise and reform our IT and data infrastructure”.

Some £530m of this will be spent in the 2026/27 year, followed by £580m in 2027/28, and £490m in 2028/29.

For this investment, the department expects to realise annualised cost savings of £210m. This will be supplemented by an additional £150m in savings delivered by the department’s £500m work to ensure 90% of its interactions are delivered digitally, plus a further £50m saved each year by vastly cutting down on the number of letters sent.

“HMRC is committed to transparency and accountability in delivering this transformation, and will report in its [next] annual report and accounts on: technical health improvements; investment outturn; [and] benefits realised,” the CEO’s letter concluded. “We remain committed to delivering a secure, modern, and efficient IT estate that supports HMRC’s mission and provides value to taxpayers.”