UK tax authority overhaul shows service gains as digital shift and tax gap test remain

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HMRC digital overhaul gains

Highlights

HMRC's digital overhaul backed by £7bn investment cut average phone waiting times from 24 minutes in March 2024 to seven minutes in March 2026.
In 2024-25, HMRC collected £865.2bn—93.6 per cent of tax due—while the tax gap rose to £59.4bn, with small businesses comprising 62 per cent of the shortfall.
HMRC aims to raise an extra £10bn by 2029-30 by narrowing the tax gap, but advisers warn increased compliance burden could hurt growth and jobs.

Early results from HMRC reform

As reported by Financial Times, the UK government is pursuing a long-term plan to remake HMRC into a digital-first tax authority by 2030, backed by about £7bn for systems and infrastructure upgrades. The programme follows years of pressure over weak customer service, complex paper-based processes and a 2024 phishing attack that exposed the need for a more resilient operating model.

Dan Tomlinson, exchequer secretary to the Treasury, says the first year of the overhaul shows measurable progress, particularly in phone performance. He says average waiting times fell from 24 minutes in March 2024 to seven minutes in March 2026, with an average of about 10 minutes overall.

Digital use is also increasing. In the first quarter of the current financial year, 5mn individual taxpayers used the HMRC app, compared with 7.5mn in all of 2025-26, while nearly 20mn people now use the Personal Tax Account, where tax code notices are increasingly being delivered digitally instead of by post.

Tax specialists say those gains do not yet prove the wider transformation has fully taken hold. Tim Stovold, head of tax at Moore Kingston Smith, says greater digital engagement is likely reducing simpler calls, but the remaining phone queries are becoming more complex, requiring better-trained front-line staff before HMRC can materially cut contact-centre headcount.

Compliance drive and revenue pressure

The second pillar of the reform is closing the tax gap, the difference between what HMRC believes should be collected and what it actually receives. HMRC collected £865.2bn in the 2024-25 tax year, equal to 93.6 per cent of tax due, but the latest tax gap stands at £59.4bn, or 6.4 per cent, up from a revised £52.8bn, or 6 per cent, a year earlier.

Small businesses account for 62 per cent of that shortfall, making them a central target of enforcement efforts. Tomlinson says the government is prepared to pursue deliberate evasion, and HMRC has committed a 350-strong team of criminal investigators focused on small business tax evasion, alongside plans for more than 30,000 high street interventions in 2026-27.

Advisers remain cautious over the scale of the revenue ambition. Ellen Milner, director of public policy at the Chartered Institute of Taxation, says HMRC’s aim of raising an extra £10bn by 2029-30 through a smaller tax gap feels very optimistic, while Zena Hanks of Saffery warns that adding compliance burdens to business could undermine growth, investment and job creation.

Customer satisfaction also remains a weak point, holding at about 80 per cent in recent years. Tomlinson says dissatisfaction among roughly one in five taxpayers is persistent, but argues the official figures may not fully capture sentiment among users who have moved to digital channels, an area the department says it wants to examine more closely.

Our earlier report on the UK’s decision to scrap the national digital ID programme explained that the incoming Burnham government planned to redirect the associated budget and administrative capacity toward cost-of-living support and other near-term priorities after broad criticism of the scheme. We also noted that, despite dropping the ID plan, mandatory digital right-to-work checks for employers were expected to continue and be expanded to cover gig-economy and zero-hours workers under Labour’s immigration bill.

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