HMRC Digital Transformation Roadmap

The UK tax and customs landscape is undergoing its most significant overhaul in decades, with HMRC’s Digital Transformation Roadmap setting out a clear vision for a fully digital tax and border system by 2030.

For businesses trading domestically and internationally, this shift will bring both opportunities and challenges, as customs processes move towards real-time digital documentation, VAT compliance evolves into continuous reporting and potential e‑invoicing, and HMRC introduces new tools to streamline tax interactions. Understanding the roadmap’s changes — particularly in Customs and VAT — is critical for businesses to remain compliant, avoid disruption, and capitalise on the efficiencies these reforms are designed to deliver.

Below, we have provided an extensive summary of the government’s plan for everyday direct and indirect taxes, as well as the processes and compliance strategies.

Customs

• Digital-first customs system – HMRC aims to create a fully digital customs environment, reducing paperwork and manual processes. This will streamline import/export procedures and improve efficiency for businesses.
• Improved border processes – The roadmap outlines efforts to simplify and automate border procedures, making it easier for traders to comply with customs requirements while maintaining security and compliance standards.
• Use of advanced technology – HMRC plans to leverage data analytics, AI, and automation to enhance risk management, detect fraud, and ensure accurate customs declarations.
• Collaboration with stakeholders – HMRC will work closely with businesses, software developers, and logistics providers to co-design systems that are user-friendly and aligned with real-world trading needs.
• Customs Declaration Service (CDS) enhancements – Continued development of the CDS, which replaces the older CHIEF system, is central to the transformation. CDS will support more flexible and scalable customs processing.
• Support for global trade – The roadmap supports the UK’s ambition to be a global trading nation by ensuring customs systems are resilient, responsive, and capable of handling increased trade volumes post-Brexit.
• Making improvements in 2025 to the customs Temporary Admission procedure – This relieves import duties for eligible goods that are imported temporarily. These will extend and simplify the time limits for some goods, remove some restrictions on who can use the procedure and what they can do with their goods

Alongside these plans, from 2027–2028, an AI-driven tool within the Online Trade Tariff will offer importers and exporters tailored guidance on tariffs and compliance, easing navigation of complex rules.

This sits alongside a series of pilots designed to digitise trade flows, including testing electronic trade documentation with industry partners in 2025 and trialling interoperable digital credentials with US Customs to speed up cross-border processing.

These changes support HMRC’s role in facilitating over £1 trillion in international trade annually, while updated checks on food and animal imports — developed with Defra and devolved governments — aim to protect public health and biosecurity without adding unnecessary friction for businesses.

Together, these initiatives mark a shift toward a more efficient, technology-driven customs regime that balances trade growth with security and compliance.

VAT

• Making Tax Digital (MTD) for VAT – HMRC is continuing to expand and enhance MTD, which already applies to VAT-registered businesses. The roadmap outlines plans to improve the MTD experience, making it easier for businesses to submit accurate VAT returns through compatible software.
• Automation and real-time data – HMRC aims to increase automation in VAT processing, using real-time data to reduce errors and improve compliance. This includes better integration with business accounting systems to streamline VAT submissions.
• Reducing the VAT gap – A major goal is to close the VAT gap—the difference between expected and collected VAT—by using digital tools and analytics to detect and prevent non-compliance.
• Support for businesses – The roadmap emphasizes supporting small and medium-sized enterprises in adapting to digital VAT systems. HMRC plans to provide clearer guidance and more intuitive digital services to help businesses meet their VAT obligations.

Income Tax Changes

• New PAYE online service: All PAYE taxpayers (~35 million) will gain direct digital access to manage their tax affairs, including income changes, allowances, and deductions.
• Digital expenses claims: PAYE customers can now submit expense claims and upload supporting documents online.
• Child benefit reporting: Employed individuals can report Child Benefit payments via their tax code, reducing the need for Self-Assessment.
• Pre-populated tax returns: From April 2026, Child Benefit data will be automatically included in Self-Assessment returns.
• Inheritance Tax digitalisation: From 2027–2028, a modern digital system will simplify IHT submissions and payments.
• Reassurance texts to customers:  For example, to confirm HMRC has received their claim and when they can expect a response. This is already in place for Child Benefit claims and some complaint cases. In 2025 to 2026 this will be expanded to Self-Assessment appeals, all complaint cases and some PAYE services, with further in the future
• Introduce digital tracking: This is so that customers can track progress without needing to contact HMRC. This will start with Child Benefit customers, who from 2025 to 2026 onwards will be able to track their claims and view their payments in real time, and will then be expanded to further services

In order to make their digital services more accessible and easier to use, HMRC is introducing between 2025 and 2026 a new customer relationship management system to provide more personalised support, starting with digitalising Inheritance Tax services.

It is also investing in AI-powered digital assistants to help users navigate services more easily, while promoting its digital tools, including the HMRC app, through cost-effective marketing campaigns.

Additionally, HMRC is expanding education initiatives to help customers better manage their tax affairs, with tailored support for pensioners, small businesses, and students to foster future entrepreneurs.

Simplification & threshold changes

• Self-Assessment thresholds have risen from £1,000 to £3,000, meaning up to 300,000 taxpayers may no longer need to file returns.
• A new digital service will let people report smaller earnings, like side hustles, without filing full returns.
• From April 2027, employers must report and pay tax on most benefits in kind in real time, simplifying the process and helping 3.5 million people avoid paying Income Tax in arrears.

Making Tax Digital for Income Tax

Making Tax Digital will roll out in stages:

• Income over £50,000 from April 2026
• Income over £30,000 from April 2027
• Income over £20,000 from April 2028

The aim is to offer real-time reporting, fewer errors, and seamless software integration.

Corporation Tax changes

HMRC is modernising Corporation Tax processes by piloting real-time nudges and risk assessments to reduce errors, overhauling legacy systems, and consulting on tailored improvements, though it has dropped plans to introduce Making Tax Digital for CT.

What does this mean for you and your business?

HMRC’s Digital Transformation Roadmap is set to bring tangible benefits for businesses, particularly smaller firms, by making tax compliance more streamlined and predictable.

Enhanced digital services will make it easier to manage obligations, with more intuitive online platforms, stronger integration with accounting software, and expanded support for MTD.

These upgrades aim to reduce the administrative load on businesses by automating routine tasks, cutting down manual data entry, and offering real-time updates and notifications.

HMRC also plans to deliver more tailored support, recognising the diversity of small business needs, by pre-filling forms using third-party data to minimise errors and improving communication channels for faster resolution of issues.

Alongside these improvements, the roadmap focuses on fairness by using data analytics to identify non-compliance and encourage accurate, timely submissions, helping to close the tax gap without creating extra burdens for compliant businesses.

These reforms are being designed to create a more stable, predictable tax environment, giving businesses the confidence to plan, invest, and grow, but if you’re unsure about any of these points, reach out and speak to our expert below.