As the department hits a digital interaction rate of 80%, more money and additional legislation is intended to help further streamline services and, ultimately, collect extra revenue for the Exchequer
HM Revenue and Customs has been provided with almost £60m to support technology investments over the rest of this decade.
In return for this investment, the department will be tasked with delivering initiatives including responsive digital prompts to ensure the right tax is collected from businesses, as well as the introduction of a new regime requiring firms to adopt electronic invoicing.
The Budget, the key measures of which were presented in parliament yesterday by chancellor Rachel Reeves and have now been published in full on GOV.UK, includes a provision for HMRC to “invest £59m in new technology over the next five years”.
This money will be used to enable the introduction of “real-time digital prompts for VAT-filing software from April 2027, and Corporation Tax-filing software from April 2028”.
This initiative comes off the back of several years in which the department has grown its use of these kind of reminders embedded in online services – with the aim of ensuring that users pay what they owe. In 2022, HMRC detailed its use of digital prompts to try and ensure it collects the correct tax revenue from the 800,000 most wealthy individuals in the UK. Earlier this month, the tax agency claimed that a trial of “digital nudges” reminding taxpayers of how to correctly classify their business expenses has generated an additional £27m of income for the Exchequer.
The continued expanded of these pointers will be informed by data – including information generated outside of government, according to the Budget red book. The document indicates that, once the new Finance Bill passes into law, from April 2028 HMRC will be empowered to “acquire third-party data more frequently for interest income and card sales”.
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“The government is investing in HMRC to modernise the tax system and help taxpayers get their taxes right first time through greater digitalisation,” the Budget says. “This investment will improve how HMRC uses information from third parties, and to build new technology to increase the use of data-driven prompts to help taxpayers avoid errors when submitting tax returns.”
Alongside the prompts for business taxpayers, the Budget outlines another significant digital project, through which “the government will require all VAT invoices to be issued in a specified electronic format from April 2029”.
“The government will work with stakeholders to develop an implementation roadmap to be published at Budget 2026,” the red book adds.
Alongside the measures set out in the Finance Bill and the Budget – which are targeted at “reducing regulatory burdens on business… [and] simplifying the tax and customs system” – more reforms intended to “to streamline processes and improve the taxpayer experience” will be detailed next spring.
“These reforms [will] build on HMRC’s Transformation Roadmap, which outlines the government’s vision for a more efficient, modernised and automated tax and customs system.”
One of the key targets of that roadmap was for 90% of HMRC’s customer interactions to be conducted digitally by 2030. The red book reveals that the figure has grown from 73.2% in 2023/24 to a current total of 80%.
