HMRC is implementing a digital-first approach to tax administration, promising major changes in how businesses and individuals interact with the tax system. This was detailed in HMRC’s ‘Transformation Roadmap’ released recently, explaining their vision for the future as ‘more automated, more focused on self-service and better set up to get things right first time’.

So what developments are planned, what impact may they have, and where are the challenges and uncertainties that remain? 

What’s Changing Under the Digital-First Strategy?

• 90% Target for Digital Interactions: By 2029/30, HMRC aims for at least 90% of customer transactions to be digital. This means more services will be delivered online, with digital self-service tools and automated processes replacing paper forms and manual interventions, though paper options will remain for those who need them.
• New Digital Tools: HMRC is investing in digital assistants, AI-powered support, and dynamically updated guidance to help users navigate services and resolve issues more efficiently.
• Reduced Reliance on Phone and Paper: While essential phone and paper services will remain, the focus is on moving routine queries and submissions to digital channels.
• Modernised Agent Services: HMRC is overhauling digital identity and registration for tax agents, aiming to improve direct, three-way communication (HMRC/agent/client) and provide more robust tools for agents to manage client affairs.

Promised Benefits for Small Businesses

• Convenience and Accessibility: Digital services are available 24/7, allowing businesses to manage tax affairs at their convenience.
• Faster Handling: Automated processes and real-time updates are expected to speed up routine transactions and reduce delays.
• Improved Guidance: AI-driven tools and dynamically updated support should help businesses stay informed on compliance and changes.
• Reduced Errors: Digital record-keeping and automated checks have the potential to reduce mistakes and the risk of penalties.

Challenges and Areas of Concern

Despite these ambitious plans, independent reports and professional feedback (quit apart from the scepticism that comes from previous experience of HMRC’s implementation timelines) highlight important limitations and risks that could affect the reality we’ll all contend with:

• Integration Gaps: HMRC’s various income tax systems do not yet interact seamlessly, which is bound to lead to errors and additional need for customer contact. This could undermine any smooth digital experience.
• Digital Agent Support Lagging: Digital improvements for tax agents are described as ‘tactical stop-gaps’, with full integration likely to be several years away. Professional advisers (like us!) are likely to face delays or complications during the transition to a ‘digital first’ system, and that in turn cannot be good news for clients.
• Rising Costs Without Clear Benefits: While HMRC expects cost savings, government reports show digital service costs have risen sharply in recent years, and some businesses have seen little or no productivity gain from previous digital initiatives.
• Unclear Timelines and Roadmaps: The transformation plan lacks detailed, public milestones, making it difficult for businesses to plan confidently for upcoming changes.
• Digital Exclusion: Around 19% of the self-employed and some small business owners are classified as ‘digitally excluded.’ While HMRC promises to maintain paper and phone options, the digital push may still disadvantage these groups.

What Do These Changes Mean for You?

• Prepare for More Digital Interaction: If you haven’t already engaged with online tax services, now is the time to start increasing your familiarity with HMRC’s digital services. They’re not going away, and everyone will be increasingly pushed in that direction over time.
• Consider Professional Advice: With digital services for agents still evolving, consulting with your accountant or tax adviser will remain important to navigate changes smoothly. We’ll keep clients up to date with progress from our perspective as well as keeping you aware of the changes that you’ll face.
• Stay Informed on Deadlines: Although the big-picture digital-first plan lacks detailed deadlines, keep an eye on future announcements. We’ll continue to keep clients informed about changes and updates.

Looking Ahead: What to Watch For

• Detailed Transformation Roadmap: The government has promised a more comprehensive digital-first roadmap later in the year, which we hope will clarify timelines and milestones for the transition.
• Agent Portal Improvements: Watch for new digital tools and platforms that will improve communication between businesses, agents, and HMRC. We may need you to authorise us to have access to some of these, so please respond promptly and help us to help you if the need arises!
• User Feedback: As digital services expand, user experience will be key to realizing the benefits of reform. Early adopters are encouraged to provide feedback to HMRC.

Can we help?

We’ll keep you up to date as HMRC’s ‘digital-first transformation’ unfolds and more information is available. We’ll try to translate the announcements as they come out so you know what’s changing and when. If you have any questions along the way, please get in touch.