Over the next five years, the Government is expanding HMRC’s capacity with the objective of closing the tax gap and bringing in an additional £6.5 billion per year by 2029/30. A range of announcements featured in this area including anti-avoidance legislation, and a commitment to overhaul HMRC’s IT systems and improve debt management by ensuring tax debt is settled faster. However, no information was provided on any specific additional investment to improve HMRC’s phone and post services. And finally, the expected consultation on e-invoicing will not be launched until early 2025.
Investment in HMRC
The HMRC settlement provides total funding of £6.7 billion in 2025/26. According to the Budget publications, the increased funding, together with the Exchequer Secretary to the Treasury becoming Chair of HMRC’s Board, marks a step change in the Government’s efforts to “close the tax gap, improve service levels, and modernise and reform HMRC”. Plans also continue to transform HMRC into a “digital‑first organisation”, with a Digital Transformation Roadmap to be published in Spring 2025.
180 new counter-fraud staff will be used to target increasing HMRC’s capability to better tackle fraud and error in child benefit and tax-free childcare via an expected gross saving of £95 million by 2029/30.
As announced in July, £1.4 billion will be invested over the next five years to recruit an additional 5,000 HMRC compliance staff in order to raise £2.7 billion per year in additional revenue by 2029/30. The first 200 are set to join this month. £262 million will be invested over the same period to fund 1,800 HMRC debt management staff, with the aim of raising £2 billion per year in additional revenue by 2029/30. £154 million will be invested to modernise HMRC’s debt management case system and a £12 million investment will be used to acquire further credit reference agency data to enable HMRC to better target their debt collection activities.
£16 million is to be invested to modernise HMRC’s app to allow income tax self-assessment taxpayers to make voluntary advance payments in instalments.
The Government also confirmed that the use of payroll software to report and pay tax on benefits in kind (payrolling of BIKs) will become mandatory as previously announced. This will take place in phases, from April 2026 and will apply to income tax and Class 1A National Insurance Contributions.
Tax agents
£36 million is being invested in order to modernise HMRC’s tax adviser registration services from April 2026 and tax advisers who interact with HMRC on behalf of clients will need to be registered with HMRC. This will be legislated for in a future Finance Bill.
From 6 April 2025, tax advisers will be required to provide an advanced electronic signature when making specified income tax repayment claims on behalf of clients.
A consultation will also be published in early 2025 on options to enhance HMRC’s powers and sanctions to take swifter and stronger action against tax advisers who facilitate non-compliance.
Umbrella company market
To tackle “the significant levels of tax avoidance and fraud in the umbrella company market”, recruitment agencies will become responsible for accounting for PAYE on payments made to workers that are supplied via umbrella companies. Where there is no agency, this responsibility will fall to the end client business. This will take effect from April 2026. A policy paper was published alongside the Budget providing further information on this measure.
Late payment interest rates on unpaid tax
From 6 April 2025, the late payment interest rate charged by HMRC on unpaid tax liabilities will increase by 1.5 percent points so that it will be set at 4 percent above base rate. Should the current Bank of England base rate remain unchanged between now and then, the interest rate will therefore increase from 7.25 percent to 8.75 percent.
Digital reporting for Individual Savings Account managers
This will be mandatory from 6 April 2027; hence draft legislation will be published for a technical consultation in 2025.
Car ownership schemes
Draft legislation will be published to deal with loopholes in car ownership arrangements. This aims to target arrangements through which an employer/third party sells a car to an employee, often via a loan with no repayment terms and negligible interest, then buys it back after a short period. This will take effect from 6 April 2026.
Charity compliance
Legislation will be introduced to ensure that only the intended tax relief is given to charities. These changes will take effect from April 2026 to give charities time to adjust to the new rules.
Liquidations of limited liability partnerships
The way capital gains are taxed when a limited liability partnership is liquidated, and assets are disposed of to a contributing member or person connected to them, changed from 30 October 2024 and will be legislated for in Finance Bill 2024/25.
Close company loans to participators
The Government will ensure that shareholders cannot extract funds untaxed from close companies by legislating to remove opportunities to side-step the anti-avoidance rules attached to the loans to participators regime. This change applies from 30 October 2024.
Reducing tax-free overseas transfers of tax relieved UK pensions
The Government removed the exclusion from the overseas transfer charge for transfers to qualifying recognised overseas pension schemes in the European Economic Area or Gibraltar from 30 October 2024 to address the risk of individuals receiving double tax-free allowances.
Rogue company directors
Collaboration between HMRC, Companies House, and the Insolvency Service will be increased to tackle those using contrived corporate insolvencies and dissolutions, often referred to as “phoenixism”, to evade tax.
Deterring tax fraud and rewards for informants
HMRC’s counter-fraud capability will be expanded to address “high value and high harm tax” and its scheme for rewarding informants will be strengthened in order to encourage reporting of high value tax fraud and avoidance.
Tackling promoters of marketed tax avoidance
A consultation will be published in early 2025 on a package of measures to tackle promoters of marketed tax avoidance.
Offshore tax compliance
The Government committed additional resources to scale up compliance activity in order to tackle serious offshore non-compliance such as fraud by wealthy taxpayers and intermediaries, corporates they control and other connected entities.
Simplification of taxation of offshore interest
A consultation has been launched to tackle challenges arising from the mismatch of information on offshore interest being provided on a calendar year basis rather than a UK tax year basis. The consultation is seeking views on options to address this mismatch, including changes to the rules so that individuals are taxed on the non-UK interest arising in the year ended 31 December that ends in the tax year.
Cryptoasset Reporting Framework and amendments to the Common Reporting Standard
A summary of responses to the consultation on the implementation of the Cryptoasset Reporting Framework (CARF) and amendments to Common Reporting Standard was published. This includes a decision to extend the CARF’s reporting requirements to UK users. This will be legislated for in Finance Bill 2024/25, although draft regulations to implement the revised rules have already been published for consultation.
Employee ownership trusts and employee benefit trusts
A package of reforms to the taxation of employee ownership trusts and employee benefit trusts were introduced to prevent opportunities for abuse and ensure that the regimes remain focused on encouraging employee ownership and rewarding employees. These changes took effect from 30 October 2024.
Hidden economy: expanding tax conditionality to new sectors and consultation on HMRC correction powers
A consultation has been published on whether to make the renewal of further public sector licences conditional on applicants demonstrating they are appropriately registered for tax.
The Government has also published a consultation on reforming HMRC’s correction powers, exploring changes to HMRC’s existing powers and processes, and a potential new power to require taxpayers to correct mistakes themselves.
A response to the call for evidence on HMRC powers, penalties, and safeguards has also been published.
Making better use of third-party data
The Government will publish a consultation in early 2025 on modernising how HMRC acquires and uses third-party data.
Requirements for European Economic Area overseas pension schemes
The Government will bring in line the conditions of overseas pension schemes (OPS) and recognised overseas pension schemes (ROPS) established in the EEA with OPS and ROPS established in the rest of the world from 6 April 2025.
UK resident pension scheme administrators
The Government will require scheme administrators of registered pension schemes to be UK resident from 6 April 2026.
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