HM Revenue and Customs (HMRC) is undertaking one of the most ambitious transformations in UK public services: the creation of a simpler, more efficient, fully digital tax and customs system.
It is a multi-year programme driven by a clear objective: to make tax easier for UK citizens, strengthen compliance, and improve the efficiency of HMRC’s own operations.
The aim is to become “an agile department supported by a modern IT infrastructure, with innovation driving a better customer experience, helping us close the tax gap and become more efficient in how we operate,” says James Mitton, HMRC’s first Chief AI Officer.
At the heart of this evolution is a major investment in new technologies, such as generative AI and cloud platforms that enable large-scale efficiencies, working with Microsoft as a key collaborator.
This involves modernising legacy systems; further adoption of cloud-based platforms; and exploring how AI agents could help automate many operations within the organisation. And HMRC is rolling out Microsoft 365 Copilot, initially to 28,000 colleagues but with a view to extending this to 50,000.
HMRC’s Transformation Roadmap outlines a vision of a system that “makes compliance easier for individuals and businesses” and which “uses AI, data, and digital services to streamline interactions”.
The logic is plain. Transform people’s experience of tax and customs, making it simple and fitting into people’s lives, with every pound the department collects powering public services – from the NHS to clean energy, education to the economy.
Heritage of innovation
HMRC is no stranger to innovation, as Matt Vick, Head of Futures & Innovation in HMRC’s Strategy Function, explains. The department has “used AI tools and techniques like Machine Learning and Natural Language Processing for many years… including compliance targeting, document analysis, debt risk prediction, and customer contact handling.”
But the rise of generative AI changes the scale and the speed of what’s possible, he says.
Vick’s team has a mandate to scan the horizon and assess the emerging trends and technologies that could transform tax administration: “It’s clear AI will be foundational to HMRC’s future.
“It’s going to enable a more integrated, automated tax system – while taking away the repetitive and letting HMRC’s people focus on higher‑value, more complex, more rewarding work,” he says.
Personal service
Catering to the needs of more than 40 million taxpayers is a tall order, which is why HMRC runs one of the largest customer support teams in the country, staffed by around 20,000 people.
One area HMRC has been recently looking at is complaints handling. To make the process of managing complaints more efficient, the department is developing an AI agent to help advisers summarise complaints when received from customers. By responding to natural‑language prompts, the agent can help complaint handlers identify what information they need next, support issue analysis, and ensure that responses are complete, accurate, and customer‑focused.
HMRC recognises that the tax and customs system is complex. So reducing friction, increasing clarity, and aiming to deliver a more personalised, proactive, digital-first service, makes sense.
Dan Tomlinson MP, Exchequer Secretary to the Treasury, said: “HMRC’s collaboration with key partners is vital to modernising the tax and customs system.
“The government is making a significant investment to transform HMRC and by working with key partners, we can build a more agile department, with strong data capabilities and innovative technology, including AI.”
Dave Johnson, one of HMRC’s senior leaders shaping this digital transformation, says this will mean offering “smarter, more intuitive customer journeys”, with AI-powered systems giving tailored, personalised guidance for customers that reduces the likelihood of data input errors, missed deadlines, and accidental non-compliance.
“Taxpayers aren’t always aware of their obligations and unknowingly miss deadlines,” Johnson says. Coupled with even clearer customer education, communication and guidance, HMRC wants to make it easier for taxpayers to stay on top of their tax affairs through simple, digital journeys that fit around their lives.
Helping avoid such mistakes will help close the tax gap – the difference between the amount the government estimates it should receive in tax and the amount it actually collects.
“Better compliance gives the government more money to deliver its plan for change … so there’s a benefit to everybody,” Johnson concludes.
AI-powered, human first
While many public service digital projects focus on customer experience, HMRC’s internal transformation is just as significant. Across the organisation, thousands of civil servants carry out complex work to collect tax and duties, facilitate international trade, tackle fraud, provide property valuations to support taxation and benefits and administer financial support to people, serving businesses of all sizes and millions of individuals.
AI promises to streamline processes and remove mundane repetitive tasks, freeing employees up to do their jobs more effectively and efficiently.
As Johnson explains: “Some of the more complex cases involve vast amounts of data and can take an awful lot of time and resource. Generative AI can summarise that casework information and streamline our compliance activities.”
AI facilitates other productivity gains, too, from generating meeting minutes in seconds to reviewing evidence quickly and drawing insights from large bundles of documents.
“If we can reduce the amount of manual effort, our people can be freed up to spend more time on priority, higher-value tasks,” says Johnson.
But AI will not be making any final decisions on outcomes of tax review cases, he emphasises.
“Any decisions will be reviewed and signed off by a human in the process with the relevant tax expertise,” he says.
This is reinforced by HMRC’s “well‑developed AI assurance, ethics and risk management framework, tested with external ethics experts.”
Culture shift
Some colleagues are understandably nervous about the widespread adoption of generative AI throughout HMRC, Vick recognises. But through experimentation and upskilling programmes, confidence will grow, he believes, giving rise to a “workforce that feels empowered to innovate with the tools they now have”.
Excitement about the technology’s potential is certainly building among staff, judging by the comments from participants in a recent AI agent-building exercise run by Microsoft for HMRC and supported by consultancy Capgemini.
One colleague from HMRC’s legal function said: “It was great to have the chance to connect with colleagues and discuss the opportunities for agent-based AI tools.
“There is a lot of appetite in Legal Group for agents, especially in supporting clerical or research-based tasks.”
Another HMRC colleague who attended said: “What started as a conversation on the day has grown real momentum since. Support has been available to turn the agent we imagined into something that can stand up as a genuine business tool – governed, scalable, and not just living on my laptop as a clever demo.”
Trust and public value
With AI and cloud technologies underpinning the next stage of change, HMRC is building the foundations of a tax authority that is faster, more intuitive, more resilient and that works better for everyone, says Mitton.
But HMRC’s digital transformation is “about more than efficiency”, he says.
“It’s about trust, fairness, public value, and ensuring the UK’s tax and customs system keeps pace with the expectations of a modern society.”