Update on HMRC’s Transformation Roadmap

Improving day-to-day performance and the overall customer experience

Digital interactions

The Roadmap set HMRC the ambitious target of holding at least 90 percent of customer interactions digitally by 2030 (up from 76 percent in 2025). As explained in our July 2025 article on the launch of the Roadmap, this would be facilitated by new functionality in the HMRC app and online tax accounts, including AI-powered technology.

The progress update reports that uptake of HMRC’s digital services has continued to increase, with 78 percent of customer interactions held through automated or digital self-serve channels in 2025 to 2026. Perhaps more importantly, given criticism of their customer service in recent years, customer satisfaction with HMRC’s digital services is now consistently above 80 percent.

Use of the HMRC app continues to grow with 7.6 million unique users in 2025 to 2026, an increase of 1.7 million from the previous year. In January 2026 alone, around 3 million customers used the app more than 15 million times. Self-Assessment payments via the app saw a particularly sharp increase, from £499 million in January 2025 to £819 million in January 2026.

One of the key achievements in the first year of the Roadmap was the roll out of a new online PAYE service, giving around 35 million PAYE taxpayers direct access and control over their tax position, with enhanced and expanded digital features for people to notify HMRC of income changes, check allowances or deductions, and ensure they are paying the correct amount of tax.

However, the report notes that various online enhancements that should have been delivered in the first year of the Roadmap will now be delayed until 2026 to 2027. These include simplified Self-Assessment registration and digital appeals, Child Benefit claims tracking and a new expenses service enabling PAYE customers to submit claims for tax relief on allowable expenses online.

Non-digital interactions

HMRC have also cited good progress in cases where digital interactions are not appropriate or possible, including for the digitally excluded, those in vulnerable circumstances or those with more complex enquiries, with customers more likely to get through to an adviser, and with shorter wait times, than the previous year. The target for responding to 80 percent of customer correspondence within 15 working days of receipt was met in all but one month since August 2025.

However, the report notes that some customers still wait too long for HMRC to process their request and therefore there will be further investment in resource and automation to reduce the average time taken to process customer asks.

Closing the tax gap

The Roadmap set out plans to close the tax gap through process and policy changes such as digitalisation, automation and use of AI, strengthening HMRC’s compliance and debt interventions, tackling fraud and economic crime, and raising the standards of intermediaries in the tax and customs system.

HMRC’s first annual progress update comes hot on the heels of the publication of the tax gap statistics for the 2024/25 tax year (outlined in a previous edition of Tax Matters Digest), which estimated the tax gap to be 6.4 percent (or £59.2 billion), representing an increase in the tax gap from the prior year (6 percent in 2023/24).

HMRC’s progress update notes that the tax gap is a backward-looking measure and will not yet reflect recent changes in HMRC policy, performance or investment. These include:

• Legislating to prevent non-compliant umbrella companies from being used in fraud and avoidance (outlined in a previous edition of Tax Matters Digest);
• Introducing new reporting obligations on third-party data holders of financial account and card sales information from 2027/28;
• Recruiting over 1,600 compliance officers in the last year, as part of the Roadmap’s commitment to recruit an additional 5,500 compliance officers by 2029 to 2030 to ensure businesses meet their tax obligations (bringing the total to date to 2,100, with another 1,100 recruits planned in the coming year);
• Launching a strengthened reward scheme for informants, targeting information on serious non-compliance in large corporates, wealthy individuals, offshore and avoidance schemes to encourage reporting of high-value tax fraud and tax avoidance; and
• Introducing stronger powers from April 2026 to tackle tax advisers who intentionally facilitate non-compliance in their clients’ tax affairs.

The progress update notes that HMRC aim to improve compliance across the wealthy taxpayer population by publishing a ‘Further Closing the Wealthy Tax Gap’ plan in autumn 2026. However, the 2024/25 tax gap statistics show that the contribution by small businesses to the overall tax gap is roughly 10 times that of wealthy individuals – crucially, the statistics also show that failure to take reasonable care is by far the greatest behavioural contribution to the tax gap, rather than evasion. Efforts to help small businesses pay the right amount of tax on time therefore have the potential to have a far more meaningful impact on the tax gap. To this end, the progress update highlights the benefits of Making Tax Digital (MTD) for Income Tax (see below). 

Reform and modernisation

The Roadmap set out four areas for reform and modernisation of tax and customs administration:

Modernising how customers interact with HMRC

The most significant update in this regard is the launch of MTD for Income Tax in April 2026 for sole traders and landlords with income over £50,000. The service will continue to be rolled out to a wider group of taxpayers over the coming years.

In the report the Exchequer Secretary to the Treasury, Dan Tomlinson, describes MTD for Income Tax as the biggest modernisation of the tax system for a generation – helping people to get their tax right and reducing error through digital record-keeping. HMRC are supporting customers to sign up for MTD for Income Tax by writing directly to them, running a national marketing campaign and delivering hundreds of events and webinars. HMRC’s guidance on GOV.UK allows customers to check if they need to use MTD for Income Tax to report self-employment and property income. HMRC are also working closely with software providers and stakeholders to support customers through the transition.

HMRC are also building on the launch of MTD for VAT in 2019 by working with stakeholders to design a VAT e-invoicing regime from April 2029. A roadmap setting out the milestones to implementation will be published at Budget 2026.

Modernising HMRC’s IT infrastructure and workforce

Over the past year, HMRC have made several modernisation upgrades to their IT infrastructure, including:

•  Moving to new IT systems to improve customer experience through more personalised support;
• Using fewer, more efficient and cost-effective IT platforms (including secure cloud hosting) to build and adapt products more quickly;
• Delivering continuous improvement to key customer-facing digital services, including the Customs Declaration Service; and
• Harnessing the power of AI, including completing one of the largest rollouts of Microsoft Copilot licences in the Government, helping HMRC staff with day-to-day tasks such as drafting and summarising documents, emails, meeting and call notes.

Improvements slated for 2026 to 2027 include work on HMRC’s legacy Corporation Tax systems to provide a more flexible and resilient platform, and continuing to explore the use of new AI tools to automate and streamline administrative tasks.

Simplifying and modernising the legislative and administrative framework

HMRC aim to reduce the time customers spend managing their tax and customs affairs. Developments in this regard since April 2025 include:

• Legislating to support HMRC’s move to a ‘Digital by Default’ model for outbound communications – ensuring customers who use HMRC’s digital services will automatically receive digital communications unless they actively opt out;
• Reforms to modernise inaccuracy and failure to notify penalties to reduce their complexity and improve their role in supporting compliance;
• Consultation on new legislation obliging taxpayers to correct inaccuracies where they are identified; and
• Various plans set out as part of the June 2026 Tax Update, including integrating AI tools into the Online Trade Tariff to make information easier to access and use, and a consultation on implementing more timely payments in Income Tax Self-Assessment.

Sharing data and collaborating cross-government

HMRC have made greater use of data sharing across both the public and private sector and have also worked with the Government Digital Service on the deployment of ‘GOV.UK chat’, a generative AI powered customer facing chatbot, which pulls content more broadly from across GOV.UK pages.

Workstreams for 2026 to 2027 include working with the Scottish Government and Revenue Scotland to implement the Air Departure Tax, and to prepare the UK to meet its international commitment to exchange relevant Pillar Two data with other jurisdictions by the end of 2026.

Valuation Office (VO) Transformation

The VO plays a pivotal role in the UK’s property tax system, compiling and maintaining the Council Tax lists for 27 million homes and the rateable values of 2.1 million commercial properties, underpinning over £60 billion in local taxation each year.

In April 2026, the VO was integrated into HMRC with the aim of combining HMRC’s scale, data and digital capability with the VO’s valuation expertise. The Roadmap’s objective of reaching a minimum of 90 percent digital customer interaction by 2030 now equally applies to the VO. The update sets out further objectives for the VO over the next three years including reaching quicker outcomes for customers who challenge their business rates (with the aim to resolve 90 percent of challenges within 12 months by the end of 2027) and faster decisions for customers who request a review of their Council Tax band, which could be significant given the impending introduction of the High Value Council Tax Surcharge from April 2028.

Delivery framework

The Roadmap recognised that the delivery of transformation is just as important as the changes themselves. To this end, over the past year HMRC have increased their ability to test, learn and scale new technology and ways of working by launching two accelerator initiatives to test end-to-end service design and delivery in priority areas. In addition, HMRC have sought close engagement with other governmental departments (such as HM Treasury and the Department for Science, Innovation and Technology), suppliers and digital delivery partners in order to accelerate the delivery of services to the public and prepare for large-scale transformation.

The direction of travel

As Dan Tomlinson points out in the progress update, transformation of the scale envisaged by the Roadmap does not happen overnight, but momentum is building and the direction of travel from HMRC is clear. Taxpayers and advisers can expect levels of digital engagement with HMRC to increase, with a growing expectation that most routine interactions are completed online.

At the same time, scrutiny of returns will increasingly be driven by improved technology and data-gathering techniques. Ensuring that systems, processes and records are compatible with digital requirements – particularly under MTD – should be a priority for taxpayers going forward.

For further information please contact:

• Sharon Baynham
• Stefanie Redmond