Corporate report

HMRC's annual report and accounts 2023 to 2024: performance analysis

Published 30 July 2024

This section provides an analysis of how we delivered against our strategic objectives and the commitments we made for financial year 2023 to 2024. It also includes analysis of our financial performance and key risks.

Any reference to government refers to the government in place during the reporting period.

Strategic objective 1: Collect the right tax and pay out the right financial support

HMRC is your tax service – we collect the money that pays for the UK’s public services and give financial support to people. This chapter reports on our performance, including our work to prevent and correct non-compliance.

Collecting revenue and keeping the tax gap low

We have a strong track record in collecting the tax revenues that are due, and the vast majority of our customers pay their taxes in full and on time – either automatically through PAYE or by using our online services.

Each year, we measure the difference between the amount of tax that should, in theory, be paid to HMRC and what is actually paid. We call this ‘the tax gap’ and it is caused by many things, including deliberate evasion, but the largest element is the result of taxpayer error or carelessness.

We have successfully maintained a long-term reduction in the tax gap, from 7.4% in 2005 to 2006 to our latest tax gap figure (for 2022 to 2023), which was estimated to be 4.8% of total theoretical tax liabilities, or £39.8 billion in absolute terms. This means we brought in 95.2% of all tax due. Where international tax gap data is published, we compare favourably.

In financial year 2023 to 2024, total tax revenues were £843.4 billion, an increase of £29.4 billion (or 3.6%) from 2022 to 2023, continuing the upward trend of recent years.

In each financial year, we collect and protect billions of pounds of revenue that would have been lost to the Exchequer without our interventions. In 2023 to 2024, we secured ‘compliance yield’ of £41.8 billion compared to £34 billion in the previous financial year. This exceeded our annual target of £40.5 billion, which is set to be consistent with the Office for Budget Responsibility’s economic forecasts and the assumptions they make about a stable tax gap.

As part of our Spending Review 2021 plans, we invested in more than 4,000 new recruits in our compliance function, who have completed their initial training and are continuing their professional development and building experience. The stability this has brought to our workforce, along with our strengthened focus on helping customers to get their tax right from the outset, has enabled us to deliver this record level of compliance yield. The overall value of our compliance work remains clear – it returned, on average, £22 for every £1 spent on our compliance workforce in 2023 to 2024.

Read our annual tax receipts publication for 2023 to 2024.

Read our latest tax gap report.

Read more in our technical note on compliance yield.

In focus: Managing more customers in the tax system

The number of customers in the tax system is growing. The Office for Budget Responsibility (OBR) has estimated that 3.7 million more people will pay Income Tax in 2028 to 2029, due to the freezing of some tax allowances and thresholds rather than raising them in line with inflation.

This also means the number of customers with complex tax affairs is growing. In 2028 to 2029, the OBR expect there to be an additional 2.7 million customers paying the higher rate of Income Tax, and 600,000 more paying the additional rate. We also expect that more people will be dealing with more complex tax issues, such as having to pay tax on dividends and investment income.

This means more customers actively engaging in the tax system, which increases the volume of contact we have to deal with. Our aim is to encourage all customers who can, to self-serve using our online services.

We are working hard to support as many customers as possible to get their tax right at the outset, through simplification, improved guidance and online services that are quicker and easier to use.

In focus: Helping customers get their tax right and reducing opportunities to get things wrong

We want to make it easy for customers to understand and comply with their obligations. Compliance yield from activities designed to promote compliance and prevent errors from occurring (known as ‘upstream activities’) has grown as a proportion of our overall compliance yield target from 24% in 2019 to 2020 to 34% in 2023 to 2024.

Figure 1: Compliance yield from upstream activities (note 1)

Note 1: Numbers may appear not to sum due to rounding.

The data and information presented in this chart is available in an alternative format within HMRC’s annual report and accounts 2023 to 2024: chart data – tab 1.

How we are helping customers to get their tax right

Our tax gap estimate shows that small businesses account for the largest proportion of the tax gap by customer group, at 60% in 2022 to 2023, with small amounts of tax due from a very large number of taxpayers. Error and ‘failure to take reasonable care’ were still the main reasons for customers not paying the right amount of tax. That is why we focus on making sure as many customers as possible get their tax right from the outset, reducing the need for us to step in and fix problems after they have filed their tax return.

The changes we are making to modernise the tax system – such as Making Tax Digital (MTD) – are vital to reducing customer error and carelessness. In total, we expect MTD for VAT to bring in revenue of £4 billion between 2019 to 2020 and 2028 to 2029. The next stage of the programme is MTD for Income Tax, which will be implemented in 2 phases from April 2026. Reducing error will enable us to focus our resources on tackling other forms of non-compliance including tax avoidance and evasion.

We also want to deliver more of what our customers need through quick and straightforward online channels, and we are continually improving our guidance. This means we can deploy our resources where they make the most difference.

Campaigns and communications for particular sectors or groups of customers – along with simpler guidance, systems and processes – are part of our approach to improving the customer experience and building trust. This year, our campaigns included education and support for employers on applying the National Minimum Wage to providers of content for digital platforms and workers in the hair and beauty sector.

We use digital nudges in our own and external systems, highlighting to customers if they enter data that differs from what we’re expecting and, in 2023 to 2024, we reached over 3.1 million customers.

While we aim to address risks before anything has the chance to go wrong, we also carry out compliance checks to make sure people have paid the right tax. In 2023 to 2024, we completed 320,000 compliance checks, which is an increase of 15% compared to the previous year.

Recognising that going through a compliance check can be stressful, we have improved how we identify and support those who need extra help; for example, where their health or other circumstances make managing their tax affairs difficult. In addition to staffing our own Extra Support teams, in 2023 to 2024, we awarded 12 voluntary and community sector organisations a share of £5.5 million in funding to help customers with their tax affairs.

In focus: Tax Facts

Good compliance starts with a good understanding of tax, so we actively promote tax education among children and young people through our award-winning and curriculum-linked Tax Facts programme.

Tax Facts helps children and young people learn about the UK tax system before they enter it. The programme provides lesson plans, videos and other resources. Some of our people also do school visits, as Tax Facts ambassadors.

• Junior Tax Facts (ages 8 to 13) introduces primary school pupils and younger secondary school students to the basics of tax
• Tax Facts (ages 14 to 17) is designed to help teenagers learn about how the tax system works and the practical role it plays in their lives

In 2023 to 2024, our Tax Facts materials were downloaded 6,500 times, and colleagues delivered nearly 100 sessions to an estimated 7,000 young people.

You can access HMRC’s Tax Facts resources on GOV.UK.

Collecting debt

By the end of 2023 to 2024, the total debt balance had reduced to £44.6 billion, from £45.9 billion at the end of March 2023. Tax debt as a proportion of total tax revenue fell from 5.4% in 2022 to 2023, to 5.1% in 2023 to 2024.

At Autumn Statement 2023 and at Spring Budget 2024, we secured additional funding to help us continue reducing the debt balance over the next 5 years. This will enable us to collect outstanding debt more quickly and support more customers to get out of debt.

However, it’s not always possible to collect money owed to us and we expect that as the amount of debt created increases, so will the amount we’re unable to collect. Tax losses in 2023 to 2024 were £5.6 billion, of which £5.0 billion is write-offs and the remainder remissions.

‘Remissions’ is the term we use to describe money owed to us, which we have decided not to pursue any further on the grounds that it is not value for money to do so. ‘Write-offs’ is the term we use for money owed that cannot be collected due to things like a company liquidation or personal bankruptcy, or where there are no practical means of pursuing the debt. Tax losses this year were £1.9 billion higher than in 2022 to 2023. This is 38% higher than the historic average (between 2017 to 2018 and 2019 to 2020) and is primarily due to an increase in insolvencies.

Our published tax debt strategy sets out what we are doing to minimise the volume and value of tax debt. At Spring Budget 2023 and Autumn Statement 2023, we received additional funding to acquire new data, enabling us to apply a more tailored approach to debt collection in future. Having a better understanding of a person or company’s ability to pay, means we can more accurately target customers who are most able to pay their tax debt and offer the right support to those who are least able to pay, such as highlighting Time to Pay arrangements.

Read our tax debt strategy on GOV.UK.

In focus: Helping customers to pay tax debt

We support customers who are in financial difficulty to manage their way out of debt quickly and sustainably, using flexible Time to Pay arrangements that allow them to pay in instalments.

By the end of 2023 to 2024, we were supporting 902,054 customers in this way, a small decrease of around 10,000 customers compared with the end of 2022 to 2023. Over 90% of Time to Pay arrangements are completed successfully.

Self-Serve Time to Pay (SSTTP) gives people and businesses greater flexibility by enabling them to set up their repayment plan online, without having to call us. 130,632 plans were set up online in 2023 to 2024.

We have further enhanced the existing Self-Assessment SSTTP service, by introducing an affordability assessment. This allows a customer to input their income and expenditure information and receive a recommendation for an affordable plan.

If customers don’t engage with us, refuse to pay, or if a business has little chance of recovery, we take prompt enforcement action to collect the tax due where it is cost effective to do so.

Delivering financial support

As well as making sure the right tax gets paid, we play a vital role in giving individuals and families financial support and helping to grow the UK economy by supporting businesses through targeted tax reliefs. We are focused on doing this in ways that provide the support quickly and easily, while protecting the Exchequer from error and fraud.

In 2023 to 2024, we continued to provide Cost of Living Payments to qualifying households who receive tax credits from HMRC, administering payments of up to £900 to over 0.9 million eligible tax credit customers.

The estimated level of error and fraud in 2023 to 2024 Cost of Living Payments was low, between 0.1% (£0.75 million) and 0.3% (£2 million). This is thanks to the design of the scheme, and close collaboration with the Department for Work and Pensions to prevent duplicate payments being made to the same household.

We pay Child Benefit to more than 6.9 million eligible families, supporting around 11.9 million children (as at 31 August 2023). We processed over 638,000 claims across the year. The upward trend of eligible working parents claiming Tax-Free Childcare continued – in 2023 to 2024 we were supporting 740,000 families with Tax-Free Childcare for 966,000 children, compared with 650,000 families and 836,000 children in 2022 to 2023. We provided Child Tax Credit and/or Working Tax Credits to around 0.6 million families and 1.1 million children in 2023 to 2024.

Tax credits were closed to new claimants from April 2022, who now claim Universal Credit. 2023 to 2024 saw us significantly increase the rate at which we migrated existing tax credits claimants to Universal Credit, which is administered by the Department for Work and Pensions or the Department for Communities (for Northern Ireland). In 2023 to 2024, we stopped 494,000 tax credits awards after the claimant moved to Universal Credit.

As of March 2024, 608,000 tax credits awards remained in payment. Migrating tax credits customers to Universal Credit or, where applicable, Pension Credit, is planned to continue in 2024 to 2025. As a result, tax credits are planned to end on 5 April 2025 with no further payments after this date.

Protecting tax credits and Child Benefit from error and fraud

Our approach to tackling error and fraud in tax credits and Child Benefit payments is increasingly focused on prevention – guiding customers to meet their obligations and manage their awards more effectively through education and reminder campaigns. We also carry out checks to ensure tax credit awards are finalised correctly before transitioning to Universal Credit.

We have developed a new way of estimating error and fraud in tax credits, which means we no longer need to wait 14 months after the end of the tax year until all tax credits claims are finalised. The last reported estimate of error and fraud related to 2021 to 2022. Our latest estimate of error and fraud for tax credits relates to 2023 to 2024, where we estimate an overpayment rate of 4.7% (£365 million) of paid entitlement. This is unchanged from 4.7% (£415 million) for 2022 to 2023. These latest estimates show we met our commitment to keep tax credits error and fraud in line with the recent trend of around 5% in both years.

We estimate the underpayment rate to be 0.8% (£60 million) for 2023 to 2024, unchanged from 0.8% (£70 million) in 2022 to 2023. Both of these estimates are calculated using the new estimation methodology and are not directly comparable with previous years before 2022 to 2023.

Our estimate of the overall level of Child Benefit overpaid due to error and fraud in 2023 to 2024 is 1.6% (£200 million) of total Child Benefit expenditure. This estimate uses an improved measurement approach, which makes it easier to account for the duration of error and fraud by assessing eligibility within each month, rather than the full year. This methodology change means that estimates from 2023 to 2024 cannot be directly compared to previous years.

Child Benefit has strong pre-award controls. The emphasis of our compliance strategy remains on unreported changes in circumstance, focusing on promoting compliance through improved self-reporting, exploiting new opportunities to interact with customers through the new Child Benefit digital service, and improving detection of unreported changes through further data acquisition.

Compliance in Corporation Tax Research and Development tax reliefs

We administer Corporation Tax Research and Development (R&D) tax relief schemes, and expenditure on R&D tax reliefs during 2023 to 2024 was £7.7 billion. R&D reliefs support companies that work on innovative projects in science and technology, and help drive innovation and economic growth. Therefore, it is important that the support they provide is timely and effectively targeted and that we actively balance compliance efforts with the need to pay legitimate claims quickly. We consistently met our published aim to process over 80% of claims within 40 days during 2023 to 2024.

Until April 2024, the 2 reliefs in operation were: R&D Tax Credits for small and medium enterprises (SME scheme) and Research and Development Expenditure Credit (RDEC). At Spring Budget 2023 the government announced enhanced tax relief within the SME scheme, for R&D intensive loss-making SMEs, to take effect from April 2023.

A new, single expenditure credit scheme started from April 2024 for companies of all sizes, though R&D intensive loss-making SMEs can still choose to claim the enhanced support instead. Therefore, the 2 current reliefs are the Enhanced R&D Intensive Support (ERIS) and the merged scheme for R&D Reliefs.

This is the second year that our error and fraud estimates for SMEs have been produced using a random enquiry programme. There is a lag in our estimates due to the timing of Corporation Tax returns and the time it takes to carry out a compliance enquiry. The 2021 to 2022 estimates therefore do not reflect recent policy and operational measures introduced to tackle error and fraud in the reliefs.

The overall estimate of the level of error and fraud in Corporation Tax R&D tax relief schemes in 2021 to 2022 is 17.6% (£1.34 billion) of the estimated cost of the reliefs. The level of error and fraud in 2021 to 2022 is estimated as 25.8% (£1.20 billion) for the SME scheme and 4.6% (£0.13 billion) for the RDEC scheme. Expenditure on R&D reliefs during the year 2021 to 2022 was £7.6 billion.

We found fraud indicators in fewer than 10% of claims examined in the latest random enquiry programme and these claims accounted for around 5% of the total value claimed, which indicates that the majority of non-compliance is down to behaviours other than fraud. As with other parts of the tax system, the term ‘error and fraud’ includes this full range of behaviours, from mistakes and failure to take reasonable care, through to deliberate non-compliance.

In July 2023, we published our compliance approach for R&D relief, setting out the scale and shape of non-compliance in the R&D schemes, action taken by the government to date, and how we are tackling non-compliance. We continue to adapt and build on the compliance approach set out in that publication, working with external stakeholders.

At Autumn Statement 2023, the government confirmed it was closing the R&D tax relief review, which was launched in Spring 2021. As part of the review, the government announced several measures to reduce non-compliance. These are now in place and illustrative estimates of their impact is outlined below. We estimate that the policy and operational measures that have been implemented have reduced error and fraud for expenditure in 2023 to 2024 to an overall level of 7.8%, and to 14.6% for the SME scheme from an illustrative estimate in 2022 to 2023 of 13.3%, and 19.5% for the SME scheme. The government also announced an additional measure at Autumn Statement 2023 to ensure R&D payments go directly to customers, rather than being channelled through nominees or assignees.

Read HMRC’s approach to R&D tax reliefs – July 2023 report on GOV.UK.

Compliance in COVID-19 financial support schemes

At Budget 2021, the government announced a 2-year investment of over £100 million in the Taxpayer Protection Taskforce to combat error and fraud in the COVID-19 financial support schemes administered by HMRC and to cover the opportunity cost of redeploying compliance officers from higher yielding tax compliance work.

As planned, the work of our Taxpayer Protection Taskforce transitioned into business-as-usual tax compliance activity at the end of September 2023, enabling us to deal more efficiently with all aspects of a customer’s potential non-compliance. Since the start of the schemes and up to the end of March 2024, our compliance effort on the COVID-19 schemes had prevented or recovered over £1.7 billion worth of grants. By the end of March 2024, we had opened 53 criminal investigations into suspected fraud within the schemes and made a total of 87 arrests. There have been 2 convictions so far. Further ongoing criminal investigation activity has yet to be concluded within the criminal justice system and is subject to those timescales.

Our commitments in 2023 to 2024: strategic objective 1

In financial year 2023 to 2024, alongside all our activity to collect the right tax and pay out the right financial support, we made 8 specific commitments in this area. The table below details our progress against each commitment at the end of the financial year.

Strategic objective 1 status at the end of 2023 to 2024

Commitment	What we delivered	Status
New anti-evasion and other measures to tackle the tax gap	In 2023 to 2024, we implemented measures to tackle the sale of illicit tobacco, this included delivering new legislation and partnering with Trading Standards to enable HMRC to issue penalties and other sanctions. We also continued to deliver measures preventing profit shifting by multinational companies to avoid paying taxes, including new transfer pricing documentation rules in July 2023.	On track or complete
Basis Period Reform	We delivered the changes required to Self Assessment returns, to implement Basis Period Reform for the 2023 to 2024 tax year. We also delivered new guidance and support to assist customers with their Self Assessment returns, including new and interactive guidance and communications products.	On track or complete
Deliver £0.92 billion additional tax revenue between 2020 to 2021 and 2024 to 2025 by expanding campaigns and projects activity	We remain on track to deliver the amount included in the Office for Budget Responsibility’s latest forecast for the period ending 2024 to 2025.	On track or complete
Deliver £1.2 billion additional tax revenue from debt activity funded at Budget 2020	Through measures set out in Spring Budget 2020, we collected £1.8 billion, by placing more debt with Private Sector Debt Services.	On track or complete
Implementing OECD Pillar 2 rules for a global minimum Corporate Tax rate	Alongside HM Treasury, we consulted with stakeholders and took part in international negotiations leading to the introduction of the Multinational Top-up Tax and Domestic Top-up Tax. These new taxes give effect to Pillar 2 rules for a global minimum tax for multinationals, agreed by over 145 jurisdictions. We have published draft guidance to help customers understand the new taxes and continue to work with them to ensure the rules are effective. We continue to help in the design of the internationally agreed rules, and work is progressing on IT systems for the new taxes.	On track or complete
Deliver our Pensions Programme	We further enhanced the digital service for Pension Scheme administrators to use when interacting with HMRC. We are supporting customers following the McCloud judgement, this year delivering the Check your Public Service Pension Adjustment (McCloud) service, which we will continue to enhance in 2024 to 2025.	On track or complete
Support the introduction of Universal Credit	We continued to support the Department for Work and Pensions with introducing Universal Credit (UC), with detailed plans in place to complete the migration of tax credits recipients to UC by the end of 2024 to 2025.	On track or complete
Raise £749 million of additional tax revenue by the end of 2023 to 2024 with additional debt resource from Spring Statement 2022	In 2023 to 2024, we employed an additional 484 full time equivalent employees to tackle the significant increase in debt and collected £777 million.	On track or complete

Key performance metrics: strategic objective 1

Figure 2: Compliance yield (note 1)

Compliance yield is revenue collected and protected that would otherwise have been lost to the Exchequer through error, carelessness, use of tax avoidance schemes or deliberate non-compliance. It consists of several components as shown below.

Note 1: Numbers may appear not to sum due to rounding.

• Accelerated payments: disputed amounts of tax that people using tax avoidance schemes are required to pay up front within 90 days, and an estimate of the behavioural change caused by this policy. In figure 2 these are incorporated within cash expected and upstream product and process yield from 2021 to 2022.

• Upstream product and process yield: estimated annual impact on net tax receipts of legislative changes to close tax loopholes and changes to our processes which reduce opportunities to avoid or evade tax.

• Future revenue benefit: estimated effect of our past compliance work on customers’ compliance in the current tax year.

• Revenue losses prevented: revenue that we prevented from being lost to the Exchequer.

• Upstream operational yield: estimated impact of operational activities undertaken to promote compliance and prevent non-compliance before it occurs. Does not include yield from legislative or process changes.

• Cash expected: additional revenue due when we identify past non-compliance, with a reduction to reflect revenue that we estimate will not be collected.

Read more in our technical note on compliance yield on GOV.UK.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 2.

Figure 3: Receivables (note 1)

When individuals and businesses owe taxes, duties, or tax credits to us, we call these amounts ‘receivables’ for accounting purposes (this becomes a debt if the amount owed becomes overdue and is not under appeal). At 31 March 2024, gross receivables amounted to £63.1 billion, compared to £62.9 billion at 31 March 2023, consisting of £60.8 billion for taxes and duties owed to HMRC and £2.3 billion for tax credits owed to HMRC.

Note 1: Numbers may appear not to sum due to rounding.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 3.

Figure 4: Total Debt Balance

Our total debt balance fell marginally this year and around 16% is in a managed position. Of the total debt balance, 96.3% is tax debt, which as a proportion of revenue has fallen to 5.1% in 2023 to 2024. This reflects the value of the tax debt balance stabilising whilst revenues have increased.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 4.

Strategic objective 2: Make it easy to get tax right and hard to bend or break the rules

This chapter reports on the progress we’re making in simplifying tax and customs and enhancing and expanding our online services, as well as our customer service performance.

Our digital-first customer service strategy aims to meet our customers’ service needs efficiently by enabling as many customers as possible to self-serve online. It means we can focus our advisers on customers who need help to use our online services, are digitally excluded, require extra support due to health or personal circumstances, or have complex affairs.

In 2023 to 2024, we also continued working to make the tax and customs system simpler by improving our processes, policies and guidance, so it is quicker and easier for customers to manage their tax and customs affairs.

In focus: How do customers rate their experience with us?

We conduct regular surveys of how customers rate their experience with HMRC, including how easy they find dealing with tax issues and finding information. We also ask customers ‘How easy was it to deal with us today?’ after phone and digital interactions.

The ease of dealing with tax issues and finding information were broadly stable in 2023 for small businesses but showed a decrease for individuals. We maintained our ‘net easy’ score between 2022 to 2023 and 2023 to 2024 (this represents the total of positive responses minus the total of negative responses).

Ease of dealing with tax issues

• Individuals 52% positive in 2023 (57% in 2022)
• Small businesses 70% positive in 2023 (73% in 2022)

Ease of finding information from HMRC

• Individuals 51% positive in 2023 (57% in 2022)
• Small businesses 58% positive in 2023 (60% in 2022)

How easy taxpayers found dealing with HMRC – Net Easy

• +59.2 in 2023 to 2024 (+59.8 in 2022 to 2023)

Read HMRC’s annual customer survey for individuals, small businesses and agents on GOV.UK.

Simplifying tax and customs

Tax and customs can be complicated – so simplifying things as much as possible is vital to helping customers to get things right. This is why we are taking opportunities, working with HM Treasury, to simplify tax and customs and, where possible, make it easier for customers to deal with complexity through modern online services and good guidance.

Simpler policies and processes

On tax policy design, we worked closely with HM Treasury in 2023 to 2024 to deliver reforms such as simplifying the experience for the self-employed who previously had to pay 2 NICs charges to access contributory benefits, and expanding the cash basis, so more sole traders and partners can calculate their profits and pay their Income Tax more easily.

Simpler systems

We are improving the systems we use to support our customers. For example, we improved the system that holds customer PAYE records so that it proactively corrects tax codes, where incorrect or missing information was provided to us. We can now spot when a customer’s tax code may be incorrect because of wrong information and automatically issue a new one if we hold the information to do so, without them needing to contact us.

We tested this improvement on around 40,000 people. As well as getting people on the right pay sooner, these changes resulted in a 30% reduction in the number of calls to the PAYE helpline from those customers. We rolled this improved system out to all PAYE customers in January 2024 and expect it to benefit around 1.4 million of them each year.

Simpler guidance

Our guidance on GOV.UK is viewed around 750 million times per year, and in 2023 to 2024, we assessed over 10,000 pages of guidance to help us prioritise where to take action to help small businesses. This allowed us to improve our guidance in areas such as reporting VAT errors, cancelling VAT registration and supporting self-employed people and landlords to register for Income Tax Self Assessment.

In total, we published 35 interactive guidance products in 2023 to 2024, including forms, decision trees and calculators. We have also published:

• interactive forms to help people claim tax refunds
• a tool that helps people check if they can appeal a Self Assessment late filing or late payment penalty
• a new calculator to help businesses work out if they’re eligible for Small Producer Relief for Alcohol Duty

When customers need information or guidance, our Digital Assistant can help them find what they need or links them to an HMRC adviser through webchat if it can’t. Interactions with our Digital Assistant increased from 1.9 million in 2022 to 2023 to 5.1 million in 2023 to 2024, and we continue to review customer feedback to make it easier to use. Similarly, our intelligent text message service supports customers by directing them to the quickest and easiest way to resolve their query online. We issue up to 98,000 SMS messages to customers every week, covering 80 different circumstances.

What are the next steps on Making Tax Digital?

Our flagship MTD programme is playing a key part in modernising tax administration and encouraging businesses and landlords to keep accurate, up to date digital records.

In 2023 to 2024, the government announced the outcome of the review of MTD for Income Tax. It looked at the best way to design the service to support the needs of smaller businesses.

The outcomes committed us to delivering changes that would simplify the design of MTD for Income Tax for users. This included exempting specific groups, making quarterly updates cumulative and removing End of Period Statements.

Following this, we expanded testing of the service in April this year, opening it up to a broader range of agents and customers.

We plan to expand testing further in April 2025, so that customers with a wider range of circumstances can take part ahead of the introduction of MTD for Income Tax. This will enable us to thoroughly test the system and make sure it works for users, as well as let customers become more familiar with the process before they have to use it.

Read more about our plans for MTD on GOV.UK.

Improving and expanding our online services

We have made progress with implementing our digital-first strategy by expanding and enhancing our digital services and driving up their usage. Where customers need to engage with us, the majority can self-serve online through GOV.UK and the HMRC app. In 2023 to 2024, satisfaction with our digital services was consistently over 80% and our customers overall found them easy to use.

Published research shows that 86% of our customers are open to engaging with us online, but also showed that the complexity of a task was a key driver for whether customers wanted to do so. That’s why we’re simplifying processes for customers and making them as easy as possible to do online.

Since May 2023, our Child Benefit customers have been able to make claims fully online for the first time via GOV.UK or the HMRC app, making the process much faster and easier. Customers can now receive their payments in as little as 3 working days – down from an average of 21 days. They can also go online to tell us their child is staying in full-time non-advanced education, so we can immediately extend their claim and remove the need for them to contact us, as well as change bank details online and provide proof of entitlement. By the end of 2023 to 2024 more than 3.2 million customers had used these new services.

We are introducing more prompts and guidance within our online services. This includes text message and app push notifications to customers, as well as messages delivered by intermediaries that prompt them to take action while reassuring them that their issue has been resolved successfully without needing to call us.

We are also working to provide a single and simple way for people to sign in and prove their identity when using government services and, in February 2024, we began testing a new GOV.UK One Login system.

We have encouraged more customers to discover and use these online self-service options, because they provide greater ease and convenience, and allow us to operate more efficiently.

Find out how Child Benefit customers can manage their claims online on GOV.UK. www.gov.uk/child-benefit

Read about contact method preferences and digital appetite on GOV.UK.

In focus: HMRC app

The HMRC app grew in popularity and functionality during 2023 to 2024 gaining 1.9 million new users. It is regularly voted number 1 in financial apps and is rated 4.8 out of 5 on the Apple store and 4.7 out of 5 on the Android app store.

We are continually adding more functionality to the app, with 16 new app releases in 2023 to 2024. For example, customers can now use it to view their PAYE tax code, pay their Self Assessment liabilities or claim Child Benefit.

Customers can also download their National Insurance number to their Apple or Google wallet, access our Digital Assistant and webchat for support, and set reminders to complete their Self Assessment returns by the deadline.

Here is a selection of the positive feedback our app gets from customers:

I highly recommend the HMRC app. It’s very easy to use and helps you keep track of what you owe.

Making payments is very simple and easy compared to the old way of logging in through the website.

You can also check your state pension etc. I would recommend this app to anyone looking to save time and keep on top of their taxes.

Download the HMRC app from GOV.UK.

Supporting customers who need to contact us by phone or correspondence

Our digital-first strategy encourages the majority of our customers to interact with us online, freeing up our advisers to support those customers who will need to contact us by phone or post – for example, those who are vulnerable, those who struggle to get online or those who have complex queries.

We have made some important improvements in our customer service performance, especially in improving our processing time for customer correspondence, clearing 76.3% of this within 15 working days in 2023 to 2024, more than we have in any of the previous 4 years.

In August 2023, we set an ambition to process all but the riskiest applications for VAT registration within 20 working days – a significant improvement for customers on our existing service standard of 40 working days. By the end of 2023 to 2024, we were processing over 85% of applications within that new target, compared to 56% in August 2023.

Recognising the importance to people and businesses of receiving money promptly, we have prioritised issuing tax repayments. This has allowed us to reduce the number of Self Assessment repayments waiting to be processed by 64% between April 2023 and March 2024.

This year, the proportion of callers who wanted to speak to an adviser and were able to do so was slightly lower than 2022 to 2023. We maintained the number of customers who found interacting with us easy compared to 2022 to 2023 levels.

Our ability to meet service standards on telephony and correspondence has been affected by growth in the number of customers in the tax system and an increase in the number of customers with complex tax affairs, combined with departmental budgetary pressures.

Our financial settlement at Spending Review 2021 required us to achieve annual cost savings of £500 million by 2024 to 2025 compared with 2021 to 2022, to be able to meet our service standards. Since then, other factors, primarily the need to absorb inflationary pressures, have increased that efficiencies and savings challenge to £719 million. We are on track to exceed the original £500 million savings ask, but the £719 million is proving more challenging.

This means that our overall service levels on telephony and correspondence remained below our service standards in 2023 to 2024, and we recognise that this caused real difficulties for some customers and agents. To deliver the service standards our customers expect, our aim is to reduce the volume of contact through phone and correspondence over time and boost the number of customers self-serving online, without needing to contact us. This is not just about saving money: it means more customers solve their queries quickly and easily, and our advisers can focus on those who need their help.

In 2023 to 2024 we made changes to reduce volumes of contact via phone or correspondence – for example, enabling customers to view and download their 5-year employment history within the HMRC app. This is a simple change that led to a 57% decrease in employment history telephone calls to us in 2023 to 2024, compared to the previous year, helping to stabilise the volume of phone and correspondence contact in 2023 to 2024 compared to previous years.

During our trial of a seasonal opening for the Self Assessment helpline (between 12 June and 4 September 2023), we directed customers to our Digital Assistant, backed up by a webchat service and a helpline for those customers who are unable to use our online services, or who need help to do so.

This allowed us to redeploy advisers to high priority work, such as processing an additional 373,000 overpayment work items. We conducted and published an evaluation of the trial which found that this approach led to further increases in the use of our online services, and that customer satisfaction remained high. We are considering the findings of this trial and engaging with our customers and stakeholders on how we can support more customers to move online.

We estimate that around 66% of total telephony contact is still for tasks that can be carried out online. That’s why we have grown and improved our online services, and the HMRC app, while ensuring that our digital-first strategy moves at a speed and in ways that our customers are comfortable with.

Read the evaluation of these trials on GOV.UK.

View our agent dashboard on GOV.UK.

In focus: Changing trends in how our customers interact with us

While the number of customers in the tax system is growing, we were able to stabilise contact volumes via phone and correspondence in 2023 to 2024, compared to previous years. We also achieved growth in the number of customers using our online services and app, which is vital to ensuring our phone advisers can focus on helping those customers who need to speak to them.

In 2023 to 2024:

• 388 million (69%) of our interactions with customers took place through online self-serve channels, compared with 324 million (63%) in 2022 to 2023
• Our personal and business tax accounts and HMRC app were accessed 248 million times, up from 201 million in 2022 to 2023
• 90.5% of Self Assessment customers filed their tax return online by the 31 January 2024 deadline
• The volume of contact by phone, where the caller wanted to speak to an adviser, and correspondence reduced by 5.4 million, compared to 2022 to 2023

Figure 5: 4-year trend in customer interactions via digital and analogue channels (note 1)

Year	Total telephony adviser attempts and correspondence (million)	Total Business Tax Account, Personal Tax Account and HMRC app sessions (million)
2020-21	41.6	190.0
2021-22	45.5	179.8
2022-23	50.6	201.0
2023-24	45.2	247.9

Note 1: Figures for digital interactions from past years have been revised due to improved data.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 5.

Our commitments in 2023 to 2024: strategic objective 2

In the financial year 2023 to 2024, alongside all our activity to make it easy to get tax right and hard to bend or break the rules, we made 7 specific commitments in this area. The table below details our progress against each commitment at the end of the financial year.

Strategic objective 2 status at the end of 2023 to 2024

Commitment	What we delivered	Status
Develop how people and businesses pay HMRC	We consulted extensively with industry, to assist us in developing our payments capabilities and we are working to provide a version of a Payments Application Programming Interface (API) that the industry can test and refine.	On track or complete
Making Tax Digital	We successfully delivered functionality to support testing of the Income Tax Self Assessment service. We also continued to improve and simplify our Making Tax Digital (MTD) online services for all users, by removing End of Period Statements and improving the design of quarterly updates	On track or complete
Manage Time to Pay	In 2023 to 2024, we enhanced and expanded our Time to Pay online services to give customers quicker and easier ways to manage their tax affairs. We also implemented iterative improvements to the Employer PAYE & VAT Self-Serve Time to Pay services. By the end of 2023 to 2024, we were supporting 902,054 customers with time to pay arrangements	On track or complete
Research and Development (R&D) tax credits reform	The government has announced and legislated for a number of Research and Development (R&D) tax relief reforms, including the merger of the previous 2 schemes (R&D Tax Credits for Small and Medium Enterprises and R&D Expenditure Credit) and a new enhanced support for R&D intensive Small and Medium Enterprises. We continue to develop our compliance approach to reduce error and fraud, while ensuring legitimate claimants continue to benefit	On track or complete
Single Customer Account (SCA)	In 2023 to 2024, we prioritised the delivery of new online services, to improve the customer experience and reduce the need to contact HMRC. These included new services to manage and claim Child Benefit online, new features enabling customers to find and store their National Insurance number in their digital wallet and improvements to PAYE systems. We also introduced new technology enabling us to send personalised text messages and emails to keep customers updated about their tax affairs.	On track or complete
Tax simplification	In 2023 to 2024, working with HM Treasury, we have delivered simplification packages at every fiscal event and published the government’s simplification objectives.	On track or complete
Transition towards digital demand	In 2023 to 2024, 388 million (69%) of our interactions with customers took place through online self-serve channels. Our personal and business tax accounts, and the HMRC app, were accessed 248 million times in 2023 to 2024, up from 201 million the previous year. The amber rating reflects changes to our plans during 2023 to 2024. We continue to improve and expand our digital services, ensuring that we are changing at a speed that our customers and stakeholders are comfortable with.	Risk to delivery

Key performance metrics: strategic objective 2

Figure 6: Customer experience: Net Easy for digital, webchat and telephony contact

This metric is based on a survey offered to customers after every telephone and digital interaction asking the question: ‘How easy was it to deal with us today?’. The score represents the total of positive responses minus the total of negative responses, to achieve a net score. Our overall score of +59.2 was below our service standard of +70, with our digital services rated as the easiest route to deal with us.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 6.

Figure 7: Customer experience: Net Easy trend over time

We started tracking Net Easy on digital interactions in 2020 to 2021, expanding the scope to include telephone interactions in 2021 to 2022. This chart shows the trend in our overall net easy score over that period.

2020-21	72.2
2021-22	65.5
2022-23	59.8
2023-24	59.2

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 7.

Figure 8: Telephony adviser attempts handled

Telephony Adviser Attempts Handled Percentage (AAH) measures the proportion of callers who got through to an adviser after hearing the automated messages and choosing to speak to an adviser. Our performance in 2023 to 2024 was 66.4%, below the service level for 2022 to 2023 of 71.1% – and lower than our service standard of 85%. This is due to the factors described above.

2020-21	71.6%
2021-22	77.3%
2022-23	71.1%
2023-24	66.4%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 8.

Figure 9: Percentage of customer correspondence responded to within 15 and 40 working days of receipt

In 2023 to 2024, the proportion of customer correspondence that we responded to within 15 working days was 76.3%, above the level in 2022 to 2023, but below our 80% service standard. We responded to 88.9% of customer correspondence within 40 days, lower than our 2022 to 2023 levels, and below our service standard of 95%.

Year	15 working days	40 working days
2019-20	70.3%	88.0%
2020-21	64.4%	85.3%
2021-22	45.5%	64.1%
2022-23	72.7%	89.4%
2023-24	76.3%	88.9%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 9.

Strategic objective 3: Maintain taxpayers’ consent through fair treatment and protect society from harm

HMRC has a responsibility to treat customers fairly and ensure that everyone follows the same rules. This chapter explains the work we are doing to build public trust, maintain taxpayer consent and protect society from those who seek to harm or exploit the tax system.

Earning and maintaining public trust

We know that there is a human being behind every tax bill, and public trust in the tax and customs system is crucial in order for us to do our job effectively.

In our 2023 customer survey, around 65% of small businesses and 47% of individuals said that HMRC is an organisation they trust.

Our Charter sets out the standards and behaviours that customers and agents can expect from us. We aspire to uphold these standards to earn and maintain public trust. The most important way we can demonstrate this is by supporting our customers and agents when they are trying to get things right, and taking into account our customers’ individual circumstances, including any vulnerabilities they may have.

Read the HMRC Charter on GOV.UK.

How we support customers who need extra help

If you are struggling to pay us what you owe, we will work with you to agree a payment plan based on your financial position – but you need to engage with us on this.

If you are facing a compliance check, we recognise that it’s stressful. Our professional standards for compliance set out how we will act when carrying out any form of compliance check.

If you are vulnerable because of difficult personal circumstances or a health condition, we have a wide range of support available, including in some cases the option of face-to-face appointments and home visits.

We also signpost customers to other sources of support, including a dedicated Samaritans helpline.

Read our principles of support for customers who need extra help on GOV.UK.

Helping customers not to get caught out by tax avoidance

Tax avoidance involves ‘bending’ the tax rules to try and gain a tax advantage that was never intended by Parliament. Tax avoidance places unfair burdens on the majority who pay their fair share and denies funds for our vital public services. Most tax avoidance schemes simply do not work to save tax, and we challenge them wherever we can. Those who use them may end up having to pay more than the tax they tried to avoid, including penalties and interest.

We regularly publish information on tax avoidance schemes, those who promote them and others connected to avoidance schemes, to warn customers against getting involved in tax avoidance. Alongside our extensive ‘Tax avoidance – don’t get caught out’ communications campaign, we also write to those we suspect to be involved in avoidance schemes, advising them of the risks and urging them to speak to us if they want to leave the avoidance scheme.

Bearing down on the promotion of tax avoidance is a key element of our strategy for reducing the marketing and take up of tax avoidance schemes. We use a variety of legislation and tools to challenge promoters and others in the avoidance supply chain. Our work has led to more than 20 organisations that promote tax avoidance leaving the marketplace entirely. When others start up, we use our powers to quickly shut down their schemes.

In 2023 to 2024 we published the details of 40 tax avoidance schemes, 39 promoters, and 24 connected persons such as company directors and those in control of the promoting entity. Publishing this information helps customers to identify these schemes so they can steer clear of them, or exit them. We also issued 15 stop notices to promoters requiring them to stop promoting the tax avoidance scheme specified in the notice or face penalties of up to £1 million if they do not comply.

In 2024, the government further strengthened our powers, legislating to make it a criminal offence to promote a tax avoidance scheme after we issue a stop notice.

Raising agent standards

Around 85,000 tax and customs agent firms currently provide advice and services to 12 million taxpayers and international traders. They play a valuable role in the tax and customs system, with the majority adhering to high professional standards. However, a small minority exploit their clients or do not meet the professional standards expected of them. This harms the effective running of the wider tax and customs system and damages public trust in it. We are committed to raising standards in tax and customs advice, protecting customers and maintaining trust in the system.

We expect all professional tax agents to comply with the expectations of professional conduct that are set out in our Standard for Agents. We provide training and awareness-raising activity within HMRC to make sure we apply the Standard for Agents consistently and can support agents in meeting them.

When support isn’t likely to help, we have other actions we can take to address breaches of the Standard for Agents. These include suspending the agent’s access to our services, reporting their misconduct to their professional body or refusing to deal with them altogether.

We know that some taxpayers feel misled when using firms that specialise in claiming tax refunds from us. During 2023 to 2024, we took steps to improve transparency in the repayment agent market and protect the tax system. These include:

• shifting power away from repayment agents towards the taxpayer by removing the ability to assign the right to Income Tax repayments, which made repayments the property of the agent

• requiring repayment agents who submit claims for Income Tax repayments on behalf of their clients to register with us via the Agent Services Account and provide their Agent Reference Number when they submit some claims. If they fail to do this, we will make any repayment directly to the taxpayer rather than to the agent as their nominee

• requiring customers or agents claiming tax repayments linked to Payment Protection Insurance (PPI) payments to submit evidence in support of the claim. Any claims submitted without supporting evidence are refused

• working in partnership with the Advertising Standards Authority to report and take down misleading adverts, so people are less likely to be taken in by disingenuous claims of no risk money

• launching a campaign to educate customers of the risks of making incorrect tax refund claims when using some repayment agents. Our campaign encourages customers to check they are eligible before making a claim, and reminds them to be careful before handing over sensitive personal information to repayment agents

• making taxpayers aware of how easy it is to claim a repayment directly from HMRC through our online services, without the need to use an agent

We recognise there is more to do to raise standards in tax advice. At Spring Budget 2024 we published a consultation ‘Raising Standards in the Tax Advice Market: Strengthening the regulatory framework and improving registration’. It included a proposal to introduce a requirement for paid tax practitioners to be a member of a recognised professional body and to mandate registration with HMRC for tax practitioners who wish to interact with us on behalf of clients.

Read the HMRC standard for agents on GOV.UK.

Customer survey results: confidence, professionalism and fairness

The figures below show how small businesses, individuals and agents rated HMRC in 2023.

Positive ratings for staff professionalism were maintained for small businesses but fell for individuals and agents. Confidence scores fell this year for agents while small businesses had lower ratings on fairness.

Our quality assurance teams continue to work with advisers to monitor and improve the quality of our interactions with customers. We are focused on earning and maintaining trust, supporting customers and agents when they are trying to get things right, in line with our Charter standards.

Confidence in the way HMRC are doing their job

• Individuals: 41% (43% in 2022)
• Small business: 52% (54% in 2022)
• Agents: 27% (35% in 2022)

HMRC staff are professional

• Individuals: 54% (61% in 2022)
• Small business (note): 84% (83% in 2022)
• Agents: 63% (70% in 2022)

Note: Precise wording in the small business survey is “HMRC were professional in the last 12 months”.

HMRC treated my business fairly

• Small business: 80% (84% in 2022)

Read our full Individuals, small business and agents survey on GOV.UK.

Handling complaints

Effective handling of complaints is essential to maintaining public trust in the tax and customs system. We aim to get things right for customers first time, but when this doesn’t happen, we seek to provide a straightforward and accessible complaints process to say sorry and put things right.

Delays in HMRC services remained the main reason for complaints this year and we took on average 36 days to resolve them – longer than we would like. We are working hard to improve our handling of complaints.

The Adjudicator provides an impartial and independent service that investigates complaints that have gone through our own internal 2-tier complaints process, where the complainant remains dissatisfied. Our response to the Adjudicator’s annual report sets out how we have learned from customer complaints to improve our services.

If a customer remains dissatisfied following our handling of their complaint, they can ask their MP to refer it to the Parliamentary and Health Service Ombudsman (PHSO). In 2023 to 2024, 8 complaints about HMRC were referred to the PHSO for further investigation, with 3 upheld in full or partially upheld. We complied with all 8 ombudsman recommendations.

Read our response to the Adjudicator’s annual report on GOV.UK.

Being transparent about our performance

We publish monthly and quarterly performance data on GOV.UK, as well as sharing findings from our external research programme, our evaluations and a range of official and national statistics.

In 2023 to 2024, we published 37 research reports covering issues such as customers’ experience of dealing with HMRC and evaluations of policy changes and the COVID-19 financial support schemes.

Read quarterly performance updates on GOV.UK.

Read our research reports on GOV.UK.

Read our evaluation list on GOV.UK.

Read our annual statistics publication plan on GOV.UK.

Protecting society from harm

A key part of our duty as the UK’s tax and customs service is to ensure that everyone follows the rules and to demonstrate that we’re protecting the system from those who seek to exploit it to gain an unfair advantage.

Tax fraud and criminal attacks on the tax system damage public trust, undermine our economy, create unfair competition for legitimate businesses and rob our public services of vital funding. They also help to enable other crimes that harm communities across the UK.

When we believe a business or individual is trying to cheat or defraud the tax system, we use a range of powers and specialist investigative capabilities to uncover even the most complex and determined frauds and hold the perpetrators to account.

Tackling serious fraud and economic crime

When tackling cases of serious fraud, we focus on ways we can have the greatest impact and maximise value for money to the taxpayer. Usually, that means using our civil powers to assess tax and civil penalties, but we don’t hesitate to open criminal investigations, seek prosecutions and use confiscation to recover the proceeds of crime, when necessary.

We conduct criminal investigations to tackle cases of organised crime and serious fraud, which pose society the most harm. While these investigations are often complex, resource intensive and time consuming, they can have a big impact and are key to maintaining public trust in the system.

We collaborate with international partners to address the increasingly global nature of tax crime, enabling us to dismantle international smuggling chains and return tax fugitives to the UK. We work closely with the Organisation for Economic Co-operation and Development (OECD) and are a founding member of the Joint Chiefs of Global Tax Enforcement (J5), an alliance of tax authorities from the UK, US, Netherlands, Canada and Australia who share tools, data, technology and expertise to tackle global tax crime. We also work with international partners to tackle offshore tax non-compliance, enhancing our data and intelligence sharing through a wide range of international agreements.

Serious fraud and economic crime in numbers: 2023 to 2024

• 430 new criminal investigations and more than 10,200 civil investigations into suspected fraud initiated by our serious fraud investigators
• 344 prosecutions brought as a result of our criminal investigations, securing 302 convictions with an 88% success rate in court
• 399 individuals under criminal investigation as part of our work to tackle wealthy tax evaders
• recovered £1,094 million from our criminal investigations and Code of Practice 9 civil investigations
• 50,318 requests to share information from domestic law enforcement partners, such as the Police and the National Economic Crime Centre

Read more in our Fraud Investigation Service technical note on GOV.UK.

Taking action on money laundering

We carry out anti-money laundering supervision as part of the wider government approach to tackling economic crime and terrorist financing. We supervise more than 36,000 businesses across 9 sectors and tackle risks through education, preventative measures and inspections.

In 2023 to 2024, we:

• issued 46 alerts reaching over 850,000 recipients to make businesses aware of changes to law or guidance and emerging risks
• delivered 13 webinars attended by around 6,000 businesses and produced educational material, including 9 YouTube videos with over 33,000 combined views
• refused 601 applications to register, and suspended or cancelled the registration of 35 businesses in supervised sectors
• delivered 3,629 supervisory interventions
• issued 991 penalties totalling just under £5.4 million

Preventing phoenixism

Phoenixism is where the same people trade successively through a series of companies, each becoming insolvent or being wound up in turn, only to continue the same business through a new company – with the deliberate intent to evade paying debts.

We estimate that tax losses from phoenixism in 2022 to 2023 account for about 15% of the total losses from non-payment of debts reported in our 2022 to 2023 Annual Report and Accounts (latest available data).

To counter phoenixism, we use our data and information to target the people behind the abuse and prevent it from reoccurring. We use powers to make directors liable for the debt of a company in certain circumstances, and we refer directors to the Insolvency Service for disqualification where their conduct makes them unfit to be a director. We also use legislation to issue legal notices requiring a security payment from the new company. The payment is then used to protect against future revenue loss and can be offset against future debts. In 2022 to 2023, our use of securities legislation protected £300 million of tax.

In focus: Bringing criminal groups to justice

Here are 2 examples of how our serious fraud investigations brought criminal groups to justice in 2023 to 2024:

Laundering the proceeds of alcohol fraud

Thanks to our investigators, a group that sent £26 million of laundered money to Dubai after depositing criminal cash at banks a dozen times a day for nearly a year was jailed for more than 26 years.

Acting from a base in Buckinghamshire, the 6 group members acted as directors of 7 different companies set up purely to launder money generated by alcohol duty fraud. All 6 members were sentenced in February 2024 and we have launched action to recover the money.

Construction industry fraud

We concluded our biggest ever operation in Northern Ireland to tackle a complex form of tax fraud. Plotting from a Belfast-based accountancy firm, the group created a false audit trail that enabled clients to operate in the construction industry without paying tax or VAT.

Our fraud investigators worked with partners in the Police Service of Northern Ireland, the Public Prosecution Service, the National Crime Agency and financial institutions to stop the loss of millions of pounds in taxpayers’ money and bring the 27-strong group to justice.

Preventing criminal attacks and phishing on our systems

We have continued taking action to prevent criminal attacks on the tax system and our customers via phone and email. In 2023 to 2024, the number of vishing (voice phishing) scams reported, which attempt to trick victims into giving up sensitive information over the phone, totalled 65,516. In response to this threat, we collaborate with the Office of Communications (OFCOM) and report suspicious telephone numbers to telecommunication providers for removal.

We’re also enhancing our anti-phishing tools so we can get even better at managing intelligence from multiple sources and further strengthen our response to criminals who pretend to be from HMRC. In 2023 to 2024, we took down 25 phishing websites, a 25% increase on 2022 to 2023.

We also identified 239 HMRC-branded infringements on social media sites, which involves the unauthorised use of HMRC’s name or branding. This led to corrective actions to protect the public from being deceived into providing personal information to people masquerading as HMRC.

We received almost 152,000 reports of information relating to alleged fraud from the public via our Fraud Reporting Gateway in 2023 to 2024. We assess all reports and take relevant action. There are times when it is in the public interest for us to make payments to people for providing us with information, and this year, such payments were worth a total of £989,256.

Find out how to report phishing scams to HMRC on GOV.UK.

Enforcing the National Minimum Wage

Our work to protect society from harm extends beyond the tax and customs system. We are also responsible for enforcing the National Minimum Wage. In 2023 to 2024, we reached over 8.9 million employers and workers through webinars, letters, bulk emails, text messages and social media; and spoke directly to 1,620 employers, to help them understand their obligations. We completed 4,642 interventions, from which we identified arrears of £7.6 million for more than 52,000 workers.

If you believe you are not receiving at least the minimum wage you can contact the Advisory, Conciliation and Arbitration Service (ACAS) or submit a query on GOV.UK. We consider every complaint made.

Combating internal fraud, bribery and corruption

Protecting society from harm includes being alive to internal as well as external threats. We set out our zero-tolerance approach in our ‘Counter internal fraud, bribery and corruption’ strategy, along with a policy and fraud response plan, which describes how we respond to these threats. Our Chief Digital and Information Officer is accountable for the policy, which applies to all our employees, suppliers, contractors and business partners.

Our commitments in 2023 to 2024: strategic objective 3

In financial year 2023 to 2024, alongside all our activity to maintain taxpayers’ consent and protect society from harm, we made 9 specific commitments in this area. The table below details our progress against each commitment at the end of the financial year.

Strategic objective 3 status at the end of 2023 to 2024

Commitment	What we delivered	Status
Alcohol Duty Reform	On 1 August 2023, we successfully introduced a complete restructure of the taxation of alcohol, alongside 2 new reliefs: small producer relief and draught relief. We continue to progress work to simplify and digitise alcohol approvals, returns and payments.	On track or complete
Consolidation of antievasion and avoidance measures and powers	In 2023 to 2024, we published a call for evidence on the reform of enquiry and assessment powers, penalties, and safeguards, as part of the Tax Administration Framework Review. We will use these responses to inform the consolidation of existing anti-evasion and avoidance measures and powers.	On track or complete
COVID-19 Public Inquiry	We are prepared to fulfil our statutory obligations to the UK COVID-19 Public Inquiry, for example by identifying key documents and records. In 2023 to 2024, we responded to requests from the Inquiry within the statutory time limits.	On track or complete
Longer prison terms for egregious tax fraud	The government announced at Spring Budget 2023 that it would double the maximum prison term for those convicted of the most egregious tax fraud to 14 years. Finance Act 2024 amends legislation for all crimes that involve dishonest behaviour in relation to revenue and duties administered by HMRC that carried a statutory maximum penalty of 7 years. As part of the amendments, the maximum sentence for counterfeiting also increased from 10 to 14 years.	On track or complete
Prevent revenue loss from serious fraud	We prevented revenue loss from serious fraud in excess of £4.9 billion, exceeding our aim for 2023 to 2024.	On track or complete
Tackling criminality by pursuing illicit financial transactions	In 2023 to 2024, we delivered new activities to tackle the enablers of serious fraud, focusing on the illicit financial transactions that underpin tax crime and on money laundering in sectors supervised by HMRC. We delivered the amount expected from fiscal event investment into this work and raised £226 million in 2023 to 2024. We also delivered the first £5 million of additional compliance yield as part of a multi-year investment in work to tackle serious fraud.	On track or complete
Consultation on options to strengthen oversight of the tax advice market by Spring 2024	In 2023 to 2024, we planned to publish a summary of responses following consultation on the preferred option to strengthen the oversight of the tax advice market, however the consultation was delayed until Spring Budget 2024, and ran until 29 May 2024.	Risk to delivery
Tougher consequences for promoters of tax avoidance	We introduced 2 new measures: a new criminal offence for promoters of tax avoidance, who fail to comply with a Stop Notice issued in respect of tax avoidance arrangements; and the disqualification of directors of companies involved in promoting tax avoidance, including those who exercise control or influence over a company.	On track or complete
HMRC Charter	To support customers, we continued to improve external guidance, publishing new interactive guidance products, including forms, decision trees and calculators and improving existing guidance to make it easier to find and understand. Our people continue to develop their skills to deliver the HMRC Charter, either by completing our ‘Living the Charter’ e-learning, or by applying the Compliance Professional Standards in their compliance work.	On track or complete

Key performance metrics: strategic objective 3

Figure 10: Trust in HMRC

The graph below shows how small, mid-sized and large businesses, individuals and agents rated us when asked whether HMRC is an organisation they trust. We introduced this question into our customer surveys in different years. Individuals’ rating of trust in HMRC has decreased since 2022 and it has continued to decrease amongst agents and small businesses since the question was introduced in 2021. Trust needs to be earned, and we are seeking to do so by supporting our customers and agents to get things right whilst taking into account their individual circumstances.

	2019	2020	2021	2022	2023
Individuals	No data	No data	52%	54%	47%
Small businesses	No data	No data	70%	68%	65%
Agents	No data	No data	61%	55%	49%
Large businesses	77%	86%	70%	71%	70%
Mid-size businesses	No data	64%	65%	64%	63%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 10.

Figure 11: Customer satisfaction for digital, webchat and telephony contact

Our current key measure of how we are maintaining taxpayer consent is through overall customer satisfaction, which was 78.6% in 2023 to 2024, close to our target of 80%. When we break this down further to the satisfaction levels on each of our different channels – phone, webchat and digital – we can see that the ever-increasing number of customers using our online services to manage their tax affairs are generally very satisfied with them.

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 11.

Figure 12: 5-year customer satisfaction trend for digital, webchat and telephony contact

Overall customer satisfaction fell marginally in 2023 to 2024 and remained a little below the target of 80%.

2019-20 (includes webchat and digital services)	81.6%
2020-21 (includes webchat and digital services)	85.2%
2021-22 (includes webchat, digital and phone services)	82.0%
2022-23 (includes webchat, digital and phone services)	79.2%
2023-24 (includes webchat, digital and phone services)	78.6%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 12.

Strategic objective 4: Make HMRC a great place to work

This chapter explains the actions we are taking to create workplaces where our people feel trusted and respected, while benefiting from modern facilities, systems, tools and technology. These things help us to deliver effectively for our customers, retain and recruit the people and skills we need and ensure that everyone has a positive experience working for us.

HMRC has a workforce of more than 61,000 full-time equivalent employees, located throughout the UK. Our people have one primary purpose – to ensure customers get their tax and customs right. But we can only achieve this if we invest continually in our skills and technology and keep improving our productivity and ways of working, so we can respond to changing government priorities and deliver the services our customers need.

Our employee engagement score in 2023 saw a slight reduction after a number of years of trending upward. We recognise there is always more that can be done to support our people and improve their working experience, and remain committed to listening and taking action to address the reasons for this reduction. It was encouraging to see, however, that we scored highly in the key measures around fairness and respect at work.

Building the skills of our people

This year, we developed an HMRC-wide Learning Strategy, which sets out the critical skills and capabilities, learning pathways (including apprenticeships) and learning environments we need to achieve our ambitions. One of our biggest priorities is enhancing the digital skills of our workforce.

In October 2023, we launched a new Digital Academy, which brings together all our digital, data and technology learning, ensuring we can build confidence, competence, and technical expertise across our workforce as we deliver more of the tax service online.

The Digital Academy helps our people build digital and data skills - from awareness to expert level – and broaden their understanding of cutting-edge technology including Artificial Intelligence (AI). Our Digital Academy AI Learning Hub has a number of learning journeys helping individuals to build their knowledge of AI and generative AI, including machine learning and how AI models are built, how to engineer prompts for generative AI tools, as well as understanding the safe and ethical use of AI. Since its launch, over 21,000 colleagues have accessed the Digital Academy.

In 2023 to 2024, we delivered nearly 2,000 learning events to colleagues through our Tax Academy, helping to build the skills of our people across a range of compliance, customs and customer service topics.

By developing and promoting an interactive learning package, we have also focused on increasing awareness of the HMRC Charter and how every colleague plays a part in ensuring we deliver our Charter standards.

To build management capability, our Management Development Programme is now in its fourth year and since its launch has helped to develop skills for over 3,000 of our managers. Leadership development is also a high priority for us, and we operate a bespoke work-based programme for senior leaders to develop their leadership skills, including modules on systems, strategic thinking and communicating with impact. This year, 80 participants embarked on the 12-month learning programme, building on the 70 who joined the pilot cohort in 2022 to 2023, while a further 90 leaders have been enrolled into the 2024 to 2025 programme.

In focus: Building our workforce across the UK

We are committed to delivering a workforce that represents the communities we serve around the UK. More than 85% of our workforce, and more than 50% of our Senior Civil Servants, are based outside London in cities across England, Wales, Scotland and Northern Ireland (HMRC excluding VOA). Most of those based in London work from our outer London regional centres in Stratford and Croydon.

We have also developed data and insight hubs to better understand local labour markets in the areas we are based in and are building stronger relationships with local universities and businesses, so we can develop the talent pipelines we need, drawn from the communities we serve.

As well as meeting HMRC’s needs, our Locations Programme has delivered 12 Government Hubs across the UK, providing space to more than 40 other government departments, agencies and public bodies and helping the movement of Civil Service roles to more regions of the UK.

Improving our technology and ways of working

By ensuring our people work with improved and upgraded systems and technology, we are able to increase our flexibility and efficiency – with more colleagues able to move easily between different priority tasks in response to changes in customer demand.

Improving our IT infrastructure is not an easy task given the size and scale of our IT estate, but we have put in place new IT contracts that give colleagues better access to the latest technology and make our IT infrastructure more secure and reliable in the long term. This has helped us to reduce ‘down time’ within our systems this year by 33% for internal colleagues and 60% for our customers.

This year, upgrades to the technology and systems used by our colleagues included:

• replacing our VAT repayments risking system with significantly upgraded technology in our Investigation and Detection Risking Service (IDRS), which is used by more than 5,000 colleagues
• expanding the use of our Joint Insolvency Management Service (JIMS), which gives us more detailed and frequent information on insolvencies, replacing slower manual checks that rely on multiple business processes. Colleague feedback highlights how easy the system is to use and the significant benefits it brings to our insolvency and compliance teams, as well as external bodies like the Insolvency Service
• developing a new adviser interface tool, which allows colleagues to retrieve data more quickly across different internal systems when supporting customers on phone calls
• migrating microfilm images from perishable media to a secure online digital archive, automating manual processes

We are also establishing new ways of operating to improve the services we deliver to customers. This includes ‘model offices’ that apply new technology and innovative approaches to test and quality assure proposed changes for HMRC operations and customers in a live environment.

Our Child Benefit model office in Washington successfully delivered multiple improvements for Child Benefit customers, such as the ability to make claims and change bank details online, as well as provide proof of entitlement and full-time non-advanced education.

The Income Tax model office in Manchester is gathering insight on the causes of customer errors, as well as working with external employers to improve guidance and test new digital services such as ‘PAYE employment histories’ and ‘Find my National Insurance number’.

Changing where we work

Over the past few years, we have completely transformed our estate, providing modern workspaces with high-speed digital infrastructure and facilities that promote innovation and collaborative working. This has benefited the taxpayer by supporting the delivery of £32 million of efficiency savings in 2023 to 2024.

So far we have opened 12 new regional centres, an achievement recognised by the British Council of Offices, who awarded HMRC’s Locations Programme with its prestigious President’s Award in 2023. We have also seen considerable progress in the construction of our new Newcastle regional centre, which we expect to open in 2027. These award-winning modern purpose-built workspaces put us in a strong position to create jobs and career opportunities in every part of the UK. We paused some of our smaller office solutions this year, until 2024 to 2025, allowing us to take more time to consider options and explore new opportunities, to ensure we select the best value solutions.

As a modern, inclusive employer, we support flexible working. This flexibility enhances our employment offer and helps us to attract and retain talent. We expect most colleagues to spend a minimum of 60% of their working time in the office, where they can collaborate, learn from and connect with each other. Beyond that, they can spend up to 40% of their time working at home if they wish, provided they can do their job effectively from home and this fits with the department’s needs. Analysis shows that our customer advisers are similarly productive at home and in the office. Our advisers answered 15.9 calls on average per day at home, compared to 16.3 in the office (based on data between October 2022 to December 2022).

Supporting colleague wellbeing

We recognise the value and importance of a culture that supports the wellbeing of our people so they can work at their best, and that reflects the society we serve.

This means taking an active stance against unacceptable behaviour, including all forms of discrimination and bullying. We continued to make this a priority in 2023 to 2024, delivering the remaining aspects of our Respect at Work and Race Delivery programmes with success measures in place to drive and monitor progress. We have increased representation for ethnic minority colleagues to 19% by the end of 2023 to 2024, up from 14% in 2019 to 2020, and above the national average across those of working age.

Our Accessibility Centre of Excellence provides Assistive Technology and career-long support to disabled colleagues. We also recruited 84 new colleagues through our Life Chances Exceptions programme in 2023 to 2024, which helps us to recruit disadvantaged candidates into the workplace.

To support neuro-divergent colleagues, we worked with our supplier of Occupational Health services to provide access to workplace assessments, in-depth clinical advice on workplace adjustments and professional coaching, as appropriate. Design experts for our new regional centres worked with their neurodiverse communities to develop sensory-muted design including appropriate wall and desk finishes and sensory-muted ‘pods’. The Construction Industry Council has awarded us 13 ‘Inclusive Environments Recognition’ awards in recognition of our commitment to delivering inclusive workspaces.

In focus: HMRC People Awards

We are focused on helping colleagues feel connected to our purpose. One way we do this is by showcasing individual and team excellence through our annual People Awards. The 2023 winners included:

• Individual of the year: The leader of our ’Cloud Academy’ established a pioneering learning programme for Cloud computing skills, providing career-enhancing skills and ensuring that our IT professionals have appropriate technical capabilities

• Team of the year: Our Help to Save team promoted a government savings scheme that encourages low-income earners to save for the future. Their work embodied connection to purpose, as it demonstrably improved the lives of customers who needed financial support

• Leader of the year: Based in HMRC’s Risk Intelligence Service, our leader of the year developed a fantastic team ethos in a virtual team spanning 6 sites, achieving one of our highest Employee Engagement scores

Health and safety

To ensure we have effective health and safety arrangements in place, we provide access to practical learning, specialist support and advice. This year, we introduced a new central database of incident reports and learning completion, giving managers, colleagues and trade union safety representatives access to real-time health and safety performance information.

Our modern workplaces are managed by in-house and third-party professional service providers, and our Building Risk Assessments reflect the robust safety measures that we have in place. We encourage colleagues to report all accidents and instances of work-related ill health. As an employer, we report incidents in specific categories to the Health and Safety Executive (HSE), under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR).

We monitor incident reports and in 2023 to 2024 we reported 31 incidents to HSE (compared to 23 in 2022 to 2023). The number of non-RIDDOR incidents reported increased to 1,594 (compared to 1,322 last year).

Read HMRC’s equality objectives and gender pay gap report on GOV.UK.

Our approach to whistleblowing

Our commitment to making HMRC a great place to work includes making sure that people can speak up if they feel that things are not right. Whistleblowing case numbers have decreased in 2023 to 2024 following an increase in 2022 to 2023. These numbers are still far lower than those recorded prior to the COVID-19 pandemic, when we saw around 150 cases annually.

Table 1: Whistleblowing cases

Financial year	2023-24	2022-23
Total cases	65	92
Number categorised as whistleblowing	20 (note 1)	21

Note 1: As reported cases are still being processed this figure may increase.

HMRC Trophy Cabinet: 2023 to 2024

Our people won or were nominated for more than 30 external awards in 2023 to 2024, including:

• Counter Fraud Awards: Female Pioneer of the Year and Member of the Year
• Tackling Economic Crime Awards: Outstanding Team
• Operational Delivery Profession Awards: Development Award, Inclusion Award, Leader of the Year Award, Modern Civil Service Award
• National Computing Security Excellence Awards 2024: Security Project of the Year
• UK IT Industry Awards (Public Sector): Project of the Year
• GO Awards for Excellence in Public Procurement: Team of the Year
• Institute of Workplace and Facilities Management: Collaboration Award
• Women in Tech Employer Awards: Best Public Sector Employer

Our commitments in 2023 to 2024: strategic objective 4

In financial year 2023 to 2024, alongside all our activity to make HMRC a great place to work, we made 1 specific commitment in this area. The table below details our progress against this commitment at the end of the financial year.

Strategic objective 4 status at the end of 2023 to 2024

Commitment	What we delivered	Status
Transform our estate	We have largely completed our successful Locations Programme. We have opened 12 of our 14 award-winning, greener Government Hubs that are enabling smarter working for over 40 government departments, agencies and public bodies. Some of our smaller office solutions were paused until 2024 to 2025 to enable consideration of new opportunities that could potentially offer better value for money and ensure HMRC retains the required skills in the right locations.	Risk to delivery

Key performance metrics: strategic objective 4

Figure 13: Employee Engagement Index

While our Employee Engagement Index has trended upwards over the last 5 years, the score of 56% in 2023 is a reduction on our 2022 score. Scores for all of the 5 employee engagement questions on our annual People Survey decreased when compared to 2022. Of these, scores for colleagues feeling ‘proud when they tell people they are part of the organisation’ have experienced the largest decrease when compared to 2022. In 2023, scores for the majority of the 9 themes within the People Survey have decreased. Across the core themes the largest decrease has been experienced in the ‘Pay and Benefits’ theme which has dropped by 5 percentage points to 31% this year.

2019	49%
2020	57%
2021	59%
2022	59%
2023	56%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 13.

Figure 14: Annual People Survey – Fairness

Over the past 5 years we have introduced new values, commitments and behaviour standards and made changes to policies, processes and key employee interactions such as managing sickness absence and speaking up. The fairness and inclusion scores in our annual People Survey reflect the improvement in colleagues’ experience of working at HMRC over the past 5 years.

I am treated fairly at work

2019	76%
2020	82%
2021	84%
2022	84%
2023	83%

I am treated with respect by the people I work with

2019	84%
2020	88%
2021	90%
2022	89%
2023	88%

Inclusion and fair treatment theme

2019	72%
2020	78%
2021	81%
2022	80%
2023	79%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 14.

Figure 15: Sickness absence data

Sickness absence levels are measured using Average Working Days Lost (AWDL), which is the total number of days lost to sickness absence over a 12-month period divided by our current full-time equivalent (FTE) employees. Post-pandemic there has been an incremental increase in average working days lost, with the main reason being mental health and stress related absences. This is also reflected in comparable organisations.

	Pandemic related absences	Non-pandemic related absences	Total
2019-20	0	7.48	7.48
2020-21	0.87	4.91	5.78
2021-22	1.61	6.65	8.26
2022-23	0.75	8.00	8.75
2023-24	0.25	8.22	8.47

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 15.

Figure 16: Workforce diversity characteristics

We publish workforce diversity data and equality information in our report on compliance with the public sector equality duties on GOV.UK.

Ethnic Minority

The term ethnic minority includes colleagues who declared their ethnicity as Black, Asian, Chinese or mixed ethnic background. White ethnic minority backgrounds are not included in this data category.

Year	SCS	All staff
2019-20	9%	14%
2020-21	11%	15%
2021-22	11%	17%
2022-23	10%	18%
2023-24	10%	19%

Disability

Year	SCS	All staff
2019-20	6%	14%
2020-21	6%	14%
2021-22	6%	13%
2022-23	7%	14%
2023-24	8%	14%

Woman

Year	SCS	All staff
2019-20	46%	54%
2020-21	45%	53%
2021-22	47%	52%
2022-23	47%	52%
2023-24	46%	52%

Sexual Orientation

This chart shows the percentage of people who declared their sexual orientation as gay man, gay woman/lesbian, bisexual or other.

Year	SCS	All staff
2019-20	4%	5%
2020-21	7%	6%
2021-22	7%	6%
2022-23	8%	7%
2023-24	7%	7%

The data and information presented in this chart is available in an alternative format within the HMRC’s annual report and accounts 2023 to 2024: chart data – tab 16.

Strategic objective 5: Support wider government economic aims through a resilient, agile tax administration system

HMRC does much more than collect taxes. This chapter explains how we are supporting wider government aims by modernising the UK border and improving our resilience and sustainability.

Delivering a modern, effective customs system

As the UK’s tax and customs authority, we have an essential role to play in ensuring the customs system supports the smooth flow of trade and helps to deliver economic growth.

We are focused on making it easier for customers to meet their customs obligations by providing simpler processes and improved technology. During financial year 2023 to 2024, we reached some important milestones.

Extending the Customs Declaration Service

After 30 years of using our Customs Handling of Import and Export Freight (CHIEF) system to make declarations, traders are now required to submit all their import declarations through the Customs Declaration Service (CDS). Over 107 million declarations have been made since its launch in 2018, with more than 70 million of them coming in 2023 to 2024.

From March 2024, traders also started moving their export declarations to CDS and by the end of March 2024 over 4 million export declarations were already being made through the system. We understood that some businesses needed more time, however, so we extended the deadline for exporters to move their last export declaration to CDS from 30 March 2024 to 4 June 2024.

Decommissioning CHIEF is estimated to deliver up to £30 million of savings per year and migrating to CDS is an important step towards having a more efficient, digital and customer-focused customs system.

In focus: How CDS makes it easier for traders to complete their obligations

The CDS is now the UK’s single customs platform for imports and exports. Critical to the long-term flow of trade, it has the flexibility to accommodate future improvements.

The CDS benefits traders by:

• allowing them to submit customs documents safely online
• giving them access to all their financial information in a single dashboard
• enabling real time notifications and alerts on all their customs declarations and movements
• helping them to manage their business finances, by opening a duty deferment account so they can make payments by card or bank transfer, enabling goods to clear without delay

Implementing the Windsor Framework

In September 2023, we successfully delivered the first phase of our commitments under the Windsor Framework.

As a result, the UK Trader Scheme was replaced by the UK Internal Market Scheme (UKIMS), without disrupting the flow of goods into Northern Ireland. UKIMS will ensure that goods that stay in the UK are free from unnecessary paperwork, checks and duties when the new arrangements become operational from 30 September 2024. At the end of 2023 to 2024, over 8,200 businesses were authorised under UKIMS, more than 4,400 of whom were not previously authorised or eligible for the previous scheme.

We continue to support traders already moving goods between Great Britain and Northern Ireland through the free-to-use Trader Support Service (TSS). The TSS provides guidance on how to move goods into and out of Northern Ireland and can submit data to HMRC systems on traders’ behalf. Around 56,000 traders are registered with the TSS, and the service has facilitated 4.8 million goods movement declarations since 2021. The TSS has been extended until 31 December 2024.

Freeports across the UK

We are supporting the roll out of Freeports in England and Wales and Green Freeports in Scotland. These are special areas within the UK’s border where different economic regulations apply, including a range of tax incentives and customs benefits for eligible businesses. They have designated tax sites recognised in law as geographical areas where businesses can benefit from tax reliefs.

We have already supported 7 English Freeports to become operational with the 24th and final English tax site designated in February 2024. The eighth, and final, English Freeport at Humber is due to become operational in summer 2024.

In focus: Export controls and trade sanctions

We enforce UK export controls and trade sanctions that fall within our customs remit; as well as certain other trade sanctions on referral from civil enforcement bodies.

Since new international sanctions were introduced following Russia’s invasion of Ukraine, we have implemented measures to prevent the export and import of restricted goods and respond to breaches. We have also improved our capacity to investigate and enforce sanctions and we are developing new capabilities to enforce sanctions on services under criminal law.

We work with the Department for Business and Trade, Border Force, Foreign Commonwealth and Development Office, HM Treasury and other agencies, to raise awareness of sanctions and strategic export controls through educational outreach activities and capability-building events with international partners.

Our options for promoting compliance with, and tackling breaches of, export controls and sanctions include educational visits, issuing written warnings, compound settlements and, in the most serious cases, referral to the UK prosecution authorities.

Next steps in transforming the UK border

In August 2023, the government published its Border Target Operating Model for importing goods into Great Britain from countries inside and outside the EU. As part of this work, we have supported the Department for Environment, Food and Rural Affairs in implementing new controls to manage biosecurity risks to the UK.

Strengthening HMRC’s resilience

We run a vast 24/7 operation and have one of the largest and most complex IT estates in the UK, so we are continually modernising and updating our infrastructure to keep pace with changing technology and ensure it remains fit for purpose.

To help protect our customers and colleagues, for example, we are focused on migrating our critical national infrastructure to cloud and Crown Hosting, to address potential vulnerabilities within our IT estate and increase the stability, security and overall efficiency of our IT systems, services and platforms.

Three years ago, we had more than 600 services hosted on over 7,000 servers in legacy data centres. By the end of 2023 to 2024, we had successfully migrated 372 of 545 critical services, with 49 remediated.

This included our National Insurance and Pay-As-You-Earn System, which is used by almost 40,000 colleagues and consists of more than 100 million accounts, supporting around 10 million daily transactions. Changes like this enable us to build and run more resilient services for our customers and quickly adapt to meet changes in demand.

Our vital role in the government’s response to the COVID-19 pandemic showed the importance of resilient, agile and secure data management. We worked rapidly at scale and developed impressive data modelling capabilities, which were reliant on a clear understanding of what data was available, where it was held, its relevance and reliability, and many other factors.

Protecting customer data

As guardians of one of the biggest sets of customer and staff personal data in government, we are responsible for ensuring it is protected with industry standard levels of security. It’s crucial that our data use is transparent, proportionate and complies with data protection laws. We have continued to review and remediate existing systems to ensure they are fully compliant with General Data Protection Regulations (GDPR). By the end of March 2024, our Data Protection Remediation Programme had remediated 76 systems, up from 59 systems at the end of March 2023. Our Securing our Technical Future Programme came to an end, having delivered the migration of critical business services to cloud and Crown Hosting platforms while decommissioning legacy services where possible.

The Information Commissioner’s Office (ICO) concluded its routine monitoring against the Action Plan for remediation work to improve our compliance with GDPR, which was agreed with the ICO in 2021 to 2022. We continue to liaise regularly with the ICO on matters relating to data protection. In 2023 to 2024, we finished digitising our historical microfiche and microfilm records to make them easier to access and support GDPR requirements. This helps us to reply to customer Subject Access Requests, which have substantially increased since May 2023 due to increases in third party requests on behalf of customers.

As is the case for many large organisations, our systems face frequent cyber-attacks. Criminal groups and other malicious cyber actors seek to identify and exploit weaknesses in our systems to try and obtain customer data and make fraudulent repayment and other claims. We are continuously improving our cyber security, to stay ahead of such criminals. We analyse around 200 billion events across all of our systems every month, proactively blocking around 1.5 billion of these, which our security tools deem suspicious or malicious.

Investing in innovation

We are using increasingly advanced technology and analytics to enhance the way we predict, assess and target support for compliance and debt risks, as well as to analyse customer contact so we can improve services. For example, our VAT predictive analytics model uses machine learning techniques to predict the taxpayers most likely to be non-compliant, and this helps us to identify the riskiest cases faster.

Our logo detection algorithm uses a type of artificial neural network to help us identify misuse of HMRC’s logo on various websites. We use anomaly detection and image recognition techniques to help us analyse large volumes of intelligence documents.

Looking to the future, we are actively exploring the potential of newer generative AI, and how we can safely exploit it in ways that improve performance and maintain public trust. Our focus is on establishing how AI could be used internally to boost productivity – for example, by enhancing search capability, data analysis and content summarisation.

We are also engaging closely with wider government work on the potential of chatbots and other customer-facing applications – and with initiatives led by the Central Digital and Data Office (CDDO), the Department for Science, Innovation and Technology and Government Digital Services, including the call for all departments to develop AI adoption plans.

Safe, ethical use of AI is paramount. We are contributing to and aligning with new guidance, such as CDDO’s generative AI framework, which outlines principles for the safe use of internal generative AI. We have also established our own AI assurance process, AI ethics framework and governance to ensure the safe, effective and responsible use of AI models.

Our AI Ethics Working Group is responsible across HMRC for establishing mandatory processes, challenging projects and reporting on progress. We have sought additional assurance of our approach to AI from our Professional Standards Committee, whose members include ethics experts and non-executives.

Where we use AI in a way that could impact customer outcomes, we always ensure that the result is explainable, that there’s a human in the loop, and that it complies with our data protection, security, and AI ethics standards. We will continue to build on our existing AI framework and align with and contribute to cross-government best practice and guidance.

In focus: Harnessing our data to tackle fraud

Our Data Science teams received the 2023 Civil Service Creative Solution Award for their use of cutting-edge data science techniques to better understand the level and nature of tax repayment fraud perpetrated by criminals against HMRC.

Our teams deployed network analysis and machine learning techniques to process vast amounts of data, providing new insight to protect customer accounts from fraud.

Alongside our other system and repayment controls, we have prevented £1.9 billion in revenue loss in 2023 to 2024.

Supporting devolved governments

We administer Income Tax on behalf of the UK, Scottish and Welsh governments. We also work closely with the devolved revenue authorities in Scotland and Wales to support each other in administering the taxes for which we each have responsibility.

We also work with the devolved governments to understand the tax, tax credits and National Insurance implications of a range of policies, including support and compensation schemes for people, to ensure that all liabilities are understood during the policy making process. We consider the impact on devolved nations and their policies when developing our own policies. This year our support included:

Northern Ireland

The absence of the Northern Ireland Executive until February 2024 meant we had to pause work on implementing phase 2 of Northern Ireland’s Statutory Parental Bereavement Leave and Pay scheme.

During this period, Northern Ireland officials considered a range of policies in reparation for ministers returning, and we highlighted where we can provide advice on tax, tax credits and National Insurance implications.

The agreement to restore the Northern Ireland Executive referred to implementing the devolution of Corporation Tax powers, which is a process we will be closely engaged with.

Scotland

We worked with the Scottish Government and other stakeholders to ensure HMRC and commercial payroll systems would be able to implement an additional Scottish Income Tax band, along with other changes to thresholds and rates in April 2024.

We worked on the introduction of a series of Scottish benefits administered by Social Security Scotland, including building IT data sharing solutions, which allow us to deliver for our shared customers.

We worked closely with the Scottish Government and Revenue Scotland on the Bill to establish a Scottish Aggregates Tax and to plan the UK aggregates levy switch-off in Scotland, proposed for April 2026.

We also collaborated with the Scottish Government on the Trusts and Succession (Scotland) Bill, to ensure it does not inadvertently provide scope for tax avoidance.

Wales

The Welsh Government’s Basic Income Pilot scheme for care leavers is subject to Income Tax. We worked with the Welsh Government to establish a process for monitoring the number of tax refund applications made by recipients.

We are liaising with Welsh Government colleagues as they develop their Agriculture (Wales) Bill and Sustainable Farming scheme, to help them understand the potential tax interactions, particularly with inheritance tax and capital gains tax.

Becoming more sustainable

Being sustainable helps us to fulfil our core purpose efficiently, stay agile and build the resilience we need to achieve our vision of having a trusted, modern tax administration system.

How we are performing

We are making good progress towards being a Net Zero carbon organisation by 2040, having already reduced our greenhouse gas emissions by 65% by 2023 to 2024, against our 2017 to 2018 baseline.

Our new network of regional centres has helped us to reduce our carbon footprint and water-usage, increase recycling and reduce the waste we send to landfill. They all have an Energy Performance Certificate rating of B or higher and achieved a Building Research Establishment Environmental Assessment Method (BREEAM) rating of ‘excellent’ or ‘very good’. And while delivery of our biodiversity action plan has been delayed to 2024 to 2025, there is little risk attached to this due to the limited green space across our estate. We still expect this to be completed ahead of the 2025 Greening Government Commitments target.

We make sure our contracts, including our catering services, adhere to Government Buying Standards and encourage our suppliers to go beyond the minimum requirements. We require suppliers for in-scope contracts to provide a Carbon Reduction Plan confirming their commitment to achieving Net Zero. We also assess the social value of our contracts, with all our procurements including a minimum 10% weighting allocated to social value, environment and sustainability, in line with government guidelines.

We are making good progress towards eliminating consumer single-use plastics from our estate and continue to work with suppliers to seek more environmentally friendly alternatives. For example, we have implemented bring your own cup discount schemes across our estate to reduce the use of single-use cups and coffee cup recycling schemes are also in place.

This year, we also developed an environmental benefits calculator, which we use to make sustainability an integral part of key processes, like impact assessments, programme and project gateway reviews and funding decisions.

Our social impact

Many of our people already support their local communities by volunteering in schools, charities and third sector organisations in public duty roles, such as being school governors or magistrates. In 2023 to 2024, nearly 1,500 of our people invested 4,100 days volunteering in their communities, and our people donated over £500,000 in total to charities through payroll giving.

In February 2024 we launched our first supported internship scheme, offering workplace opportunities in our Liverpool regional centre to young autistic people (aged 16 to 24) and young people with special educational needs. The scheme is a collaboration between HMRC and various partner organisations, including a local college, the city council and 2 charities.

How we contribute to UN Sustainable Development Goals

Strategic objective	What we’re doing	UN Sustainability Goals
Collect the right tax and pay out the right financial support	We are ensuring that the tax and customs system continues to work effectively to bring in revenue due and we are working to maintain a low tax gap.	1 – No poverty, 8 – Decent work and economic growth
Make it easy to get tax right and hard to bend or break the rules	We are constantly expanding and improving our online services and data systems.	8 – Decent work and economic growth
Maintain taxpayers’ consent through fair treatment and protect society from harm	We are protecting society from harm, by reducing our own carbon emissions and those in our supply chain, working towards Net Zero by 2040.	13 – Climate action, 17 – Partnership for the goals
Make HMRC a great place to work	We are building the leadership, tax and digital skills that we need for the future. We are taking forward initiatives such as our award-winning Tax Facts education programme for young people, which allows colleagues to volunteer in their local community, while gaining valuable transferable skills.	4 – Quality education, 5 – Gender equality, 10 – Reduced inequalities
Support wider government economic aims through a resilient, agile tax administration system	We are improving our technology and data to ensure that the UK has a more resilient, agile tax administration system.	1 – No poverty, 8 – Decent work and economic growth

Climate-related financial disclosures

This year, for the first time, we are reporting on climate-related financial disclosures, consistent with HM Treasury’s Task Force on Climate-related Financial Disclosures (TCFD) guidance which interprets and adapts the framework for the UK public sector. We have complied with HM Treasury’s guidance for Phase 1, and Phase 2 one year early.

This section explains our governance around climate-related risks, how we integrate the identification and management of these risks into our risk management structure, and the metrics and targets we use to assess them. We intend to cover Phase 3, strategy disclosures, in future Annual Reports in line with HM Treasury’s timetable.

Read about the new requirements on climate related financial disclosures on GOV.UK. We have complied with this guidance by including recommended disclosures on governance (a – c), risk management (a – c) and metrics and targets (b). We are not required to include disclosure for metrics and target (a and c) as climate is not a principal risk.

Our governance for climate-related risks

Reporting to the HMRC Strategy Committee and, when required, to the Executive Committee (ExCom), HMRC’s Sustainability Board ensures that sustainability considerations are integral to our decision-making and to our ways of working. It meets every 2 months to oversee our sustainability and our Net Zero commitments and identify and prioritise enterprise sustainability risks. Our Sustainability Strategy was agreed at HMRC’s Strategy Committee in July 2023.

The HMRC Board appointed one of our non-executive directors, David Cooper, to provide oversight of our climate-related activities, risks, and opportunities. David also sits on our Sustainability Board and on the cross-government Climate Non-Executive Board Member Liaison Forum. Our Audit and Risk Committee have reviewed our plans and approach to TCFD.

The Sustainability Board is chaired by our ExCom Sustainability Champion, HMRC’s Director of Communications and Guidance, Andrew Pemberton. We report on our performance against sustainability metrics and targets in the ExCom monthly performance hub.

Managing climate risk

In 2023 to 2024, we identified and assessed the risks associated with the physical impact of climate change and the transition towards a low carbon economy. Key risks relating to the potential effects of extreme weather on our operations have been incorporated in our departmental risk management processes and governance.

We don’t currently consider climate to be a principal risk for HMRC because environmental risks are not expected to critically impact our ability to deliver our strategic objectives. We have already taken significant steps to rationalise our property and IT estates, transforming HMRC into a more efficient and less carbon-intensive department and we are working to mitigate the potential impacts of extreme weather.

Metrics and targets for climate-related risks

We use a variety of metrics to assess climate-related risks and opportunities, which we have reported on publicly for several years. Our performance data on sustainability comes from a range of internal and external suppliers and we follow the Greening Government Commitments (GGC) reporting methodology. The Department for the Environment, Food and Rural Affairs verifies the data and, in 2023 to 2024, the Carbon Trust externally verified our methodology on supply chain emissions, which sit outside of the GGC requirements.

To understand scope 1, 2 and 3 emissions and the Greening Government Commitments see GOV.UK.

Our commitments in 2023 to 2024: strategic objective 5

In financial year 2023 to 2024, alongside all our activity to support wider government economic aims through a resilient, agile tax administration system, we made 7 specific commitments in this area. The table below details our progress against each commitment at the end of the year.

Strategic objective 5 status at the end of 2023 to 2024

Commitment	What we delivered	Status
Borders and Trade – Northern Ireland	We continued to progress delivery of customs commitments within the Windsor Framework to legislative timelines agreed between the UK and EU.	On track or complete
Ensure our online services are accessible	In 2023 to 2024, we made good progress in ensuring our online services are fully compliant with accessibility standards (Public Sector Bodies Accessibility Standards 2018). Due to a backlog in validation testing, we achieved 56% against our aim of 70%, with a further 43% being partially compliant. We have taken a user-centric design approach to maximise the effectiveness of our services and improve customer experience.	Risk to delivery
Freeports	All 24 English Freeport Tax Sites are now operational.	On track or complete
Single Customs Platform	From March 2024, traders began moving their export declarations to the CDS), and we extended the deadline for exporters to move their last export declaration to 4 June 2024. We continue to engage with traders and external partners to manage the migration.	Risk to delivery
Single Trade Window	The first elements of a live Single Trade Window (STW) service have been built. The programme remains dependent on new legislation to enable crossgovernment collection and sharing of STW data.	Risk to delivery
Becoming more sustainable	In 2023 to 2024, we achieved a 65% reduction in greenhouse gas emissions, compared with the 2017 to 2018 baseline, to support our Net Zero ambitions and our targets under the Greening Government Commitments. We are meeting all Greening Government Commitments targets, with the exception of recycling, where we have improved on last year. We set a stretching internal target on domestic flights, and this year reduced the number of domestic flights taken versus last year.	On track or complete
Shared services (Unity programme)	In 2023 to 2024, we started the procurement of the new contracts for the provision of finance and HR systems for the Department for Transport (DfT), Department for Levelling Up Housing & Communities and HMRC. We prepared to open the joint shared service for DfT and HMRC, Unity Business Services from June 2024. We need to maintain pace and secure the funding needed to deliver this programme on time.	Risk to delivery

Key performance metrics: strategic objective 5

Figure 17: Greenhouse gas emissions (Greening Government Commitment)

Our target for greenhouse gas emissions combines emissions from our buildings and domestic business travel. We have achieved a 65% reduction from our 2017 to 2018 baseline, due to our move from legacy offices into more energy-efficient regional centres and our continued efforts to reduce business travel.

CO2e (tonnes) 2019-20	60,036
CO2e (tonnes) 2020-21	50,479
CO2e (tonnes) 2021-22	38,452
CO2e (tonnes) 2022-23	37,032
CO2e (tonnes) 2023-24	30,580
Baseline (tonnes) 2017-18	88,382
Target (tonnes) 2025	35,353

Figure 18: Waste generated (Greening Government Commitment)

The 67% reduction in waste generated, from our 2017 to 2018 baseline, has been achieved through smarter waste management, behaviour change, reductions in paper use and IT efficiencies.

Tonnes 2019-20	8,868
Tonnes 2020-21	4,980
Tonnes 2021-22	4,921
Tonnes 2022-23	4,028
Tonnes 2023-24	3,114
Baseline (tonnes) 2017-18	9,464
Target (tonnes) 2025	8,044

Figure 19: Water consumption (Greening Government Commitment)

The 63% reduction in water consumption, from our 2017 to 2018 baseline, has been achieved through moving to more water efficient regional centres.

Consumption (m3) 2019-20	524,115
Consumption (m3) 2020-21	283,474
Consumption (m3) 2021-22	239,140
Consumption (m3) 2022-23	211,307
Consumption (m3) 2023-24	207,187
Baseline (m3) 2017-18	566,078
Target (m3) 2025	520,792

Financial review

This financial review covers our financial performance in 2023 to 2024, setting out our funding, what we spent our money on, trends within tax revenues and how we continued to ensure we use public money appropriately and responsibly.

Chief Finance Officer’s foreword

HMRC performs a vital role in collecting the money that funds the UK’s public services and providing financial support to people. As the department’s Chief Financial Officer, I’m proud of the progress we’re making in doing this cost-effectively, improving compliance and keeping the UK’s tax gap low.

The funding we receive through Spending Review (SR) settlements, enables us to deliver projects that are improving the quality, resilience and security of our systems, and making it quicker and easier to interact with the tax and customs system through new and expanding online services.

Our SR 2021 settlement required us to reduce spending on our core functions year-on-year, while additional and sustained higher inflation has significantly increased our efficiency and savings requirement; reaching £719 million by financial year 2024 to 2025 compared to the original target of £500 million.

Working to achieve this requirement, while supporting a growing number of customers with complex tax affairs, has adversely impacted our customer service levels. However, despite these pressures, in 2023 to 2024, our expenditure of £7,227 million enabled us to generate £843.4 billion in tax revenue, pay out £33,274 million in support payments to customers and keep the tax gap low at 4.8%. It costs just half a penny to collect each pound of tax revenue and we delivered new and sustainable efficiencies of £166 million and additional one-off cost savings of £111 million, which enables us to further reduce our operating costs.

We are making progress with our prevent-promote-respond compliance strategy and our digital-first approach to customer service and, while we recognise we have further to go to modernise the tax and customs system at a pace that our customers are comfortable with, we remain committed to delivering our customer service standards in 2024 to 2025.

Justin Holliday
Tax Assurance Commissioner and Chief Finance Officer

Budgetary framework

HM Treasury sets the budgetary framework for government spending. Within this, we are given our own Supply Estimate, which sets our proposed maximum spending and is voted on by Parliament at the start of the financial year.

The total amount we spend as a government department is known as Total Managed Expenditure (TME). In 2023 to 2024, our TME was £40,501 million. This funding is subject to strict HM Treasury controls and consists of budgets voted by Parliament and budgets where appropriation is covered in other legislation (including tax credits, other reliefs and allowances and the National Insurance Fund).

Figure 20 shows how TME is split into Departmental Expenditure Limit (DEL) and Annually Managed Expenditure (AME) budgets, both of which are explained below.

Within our DEL budgets we have ringfences against some programmes where we receive budget for a specific policy measure, which we can only spend on that measure. This is referred to as the HM Treasury policy ringfence.

Figure 20: Our budgetary framework

Departmental Expenditure Limit (DEL) explained

Departmental Expenditure Limit (DEL) sets our budget for controllable expenditure, which includes day-to-day resource and administration costs (‘Resource (RDEL)’), and investment (‘Capital (CDEL)’).

Table 2: 5-year trend on our funding (note 1)

	2019-20 £m	2020-21 £m	2021-22 £m	2022-23 £m	2023-24 £m
Resource DEL	4,075	4,961	6,024	6,400	6,694
Capital DEL	364	564	738	661	751
Total DEL	4,439	5,525	6,762	7,061	7,445

Note 1: Numbers may appear not to sum due to rounding.

Resource (RDEL) funding

Our resource funding has varied over the last 5 years due to our work in supporting wider government aims, such as exiting the European Union and delivering the COVID-19 financial support schemes. We are also managing the impact of inflation on our operating costs.

Core operations costs make up the largest component of our funding, most of which are relatively fixed in nature, with approximately 62% on staff costs and a further 19% on IT. In 2023 to 2024, funding for our core operations increased to £3,505 million, mostly to cover higher than forecast inflation in our customer service, compliance, and systems costs.

We worked on improving processes, productivity, and finding savings within our IT and estates to help us meet our stretching efficiency and savings target and mitigate the increase to our costs.

The funding we receive at government fiscal events has increased over the last 5 years. This covers specific initiatives, such as recruiting extra compliance officers to tackle evasion, avoidance and non-compliance. Policy measures funded in 2023 to 2024 included £37 million to collect outstanding debt more quickly, and support more customers to get out of debt, and to tackle the most complex tax risks, ensuring large and mid-sized businesses pay the tax they owe.

Funding to support investment in IT and data infrastructure has allowed us to enhance and expand our online services via GOV.UK and in the HMRC app. However, inflation has also impacted our IT estate and the IT licenses and contracts we hold.

We have continued improving the integrity of the data we use and have made progress in managing the risks associated with processing customer personal data. For example, funding was allocated to deliver our Data Protection Remediation project, which, over 3 years, will address an agreed list of systems which pose a General Data Protection Regulation risk. We have currently completed the remediation of 76 systems, with several business and IT risks mitigated. Our work to modernise our IT and data infrastructure has helped the department achieve new sustainable efficiency savings of £42 million.

Capital (CDEL) funding

Our capital investment has grown over time, driven by funding for our work on exiting the European Union.

In 2023 to 2024, the main changes to our capital funding related to the Windsor Framework and customs IT systems. This helped to deliver the agreement which was published on 27 February 2023, between the UK and EU, and support the smooth flow of trade within the UK internal market. Additionally, we continued work on the Customs Declaration Service, a critical customs system which facilitates trade and will help to deliver a secure and effective border.

Within this capital investment, our funding for change and remediation projects has been around £150 million to £200 million since 2019 to 2020, enabling us to continue improving our IT systems and deliver projects like Making Tax Digital (MTD). MTD for VAT is predicted to deliver tax revenue of £4 billion up to the end of 2028 to 2029.

Our CDEL funding lets us deliver things like the Single Customer Account, which will enable individual taxpayers to see all their information in one place and manage more of their tax affairs online in a more joined-up way. Likewise, our investment in the Unique Customer Record will enable us to standardise and enhance data quality. This makes using our data cheaper and easier, while also simplifying account access for customers.

We also continued to invest in improving our access to information and enhancing data and IT remediation, which helps mitigate our Exploiting Information risk.

What we spend our funding on

In 2023 to 2024, we spent £3,562 million total DEL (TDEL) on our core operations, delivering the resources and systems we need to collect tax and maintain a low tax gap. Figure 21 shows the trend in our total expenditure from 2019 to 2020 to 2023 to 2024, broken down by activities.

Figure 21: HMRC expenditure (TDEL) in 2023 to 2024 (note 1)

Note 1: Numbers may appear not to sum due to rounding.

Higher than forecast inflation increased the cost of our operations and we have had to make difficult spending choices to remain within budget. We restricted spending on areas such as travel and subsistence and external professional services, for example, while protecting core customer services and compliance expenditure where possible. Additional and sustained higher inflation also significantly increased our efficiency and savings requirement over the Spending Review period; reaching £719 million by 2024 to 2025 compared to the original target of £500 million.

Our expenditure on facilitating the smooth flow of trade at the border reduced in 2023 to 2024 as we moved out of transitional activity following the UK’s exit from the European Union, and towards a steady-state border. This decrease is offset by new activity of £102 million relating to Windsor Framework implementation and an agreed extension to the Northern Ireland Trade Support Service (TSS), providing continuous support for traders moving goods between Great Britain and Northern Ireland.

As part of the government response to cost of living pressures, we played a central role in providing financial support to people. We delivered £760 million of support to over 0.9 million eligible tax credit customers, with up to 3 Cost of Living payments, totalling £900.

Expenditure on transforming and modernising our IT systems was £413 million. This work will make them more efficient, improve the customer experience, reduce burdens on business and improve tax compliance. This activity contributes to £42 million in new efficiency savings through modernising our legacy IT estate and replacing existing IT contracts with new, more efficient services and suppliers.

We also continued to deliver a large and complex portfolio of change projects. Our total spend on this was £668 million in 2023 to 2024, which includes ministerial commitments such as Making Tax Digital and Pensions Reform. This spending has driven £32 million in sustainable efficiencies for us in 2023 to 2024 and delivered £953 million in additional tax revenue.

Figure 22 shows our expenditure in 2023 to 2024 by type of spend. The majority of our spend was on staff-related costs and IT and telecommunications. Our cost base is largely fixed, especially in the short term, leaving limited areas for managing our spend outside of staff costs.

Figure 22: HMRC Group expenditure (RDEL) for 2023 to 2024 (notes 1 to 4)

Note 1: Numbers may not sum due to rounding.
Note 2: HMRC Group includes VOA figures.
Note 3: ‘Other’ includes income.
Note 4: Total excludes the Cost of Living expenditure of £760 million.

Table 3: 5-year trend on our spending (note 1)

	2019-20 £m	2020-21 £m	2021-22 £m	2022-23 £m	2023-24 £m
Resource DEL	4,287	4,796	5,717	6,329	6,502
Capital DEL	337	538	665	556	725
Total DEL	4,624	5,334	6,382	6,885	7,227

Note 1: Numbers may appear not to sum due to rounding.

Variances between budget and expenditure

In 2023 to 2024, we underspent by £218 million, the equivalent of 2.9% of our DEL budget. When excluding our budgets under HM Treasury policy ringfences (referenced in the Budgetary Framework section), we had an underspend of 0.3%.

Table 4: Financial performance (notes 1 and 2)

Due to the amount of data presented, only part of the table below is visible. Please use the scrollbar at the bottom of the table to view all the columns.

	Budget £m	Expenditure £m	Expenditure compared to budget £m	Expenditure compared to budget %	Underspend on ringfences £m	Position excluding ringfence underspend £m	Position excluding ringfence underspend %
Resource DEL	6,694	6,502	-192	-2.9%	174	-18	-0.3%
Capital DEL	751	725	-26	-3.5%	21	-5	-0.7%
Total Del	7,445	7,227	-218	-2.9%	195	-23	-0.3%

Note 1: There are some technical differences between how our expenditure appears in the financial statements, funding and the wider government accounts.

Note 2: Numbers may appear not to sum due to rounding.

Against our Resource DEL budget of £6,694 million, we underspent by £192 million. When excluding underspends in HMT ringfenced budgets, the underspend was £18 million (0.3%). Factors contributing to the underspend include utilities and rent reductions in our offices, higher than expected levels of attrition in our compliance function and spend reductions in more discretionary areas such as professional services and travel and subsistence. This was partially offset by inflationary pressures and risks materialising in our IT function which could not be mitigated.

Against our Capital DEL budget of £751 million, we underspent by £26 million. This reduces to £5 million (0.7%) when underspends in HMT ringfenced budgets are excluded. Factors contributing to the underspend included our successful management of emerging risks and regular reprioritisation across our large delivery portfolio, along with some amended delivery timelines. The sale of our Warrington inland border force site late in the financial year also contributed.

Annually Managed Expenditure (AME) explained

AME covers our more flexible budgets for volatile or demand-led expenditure, including tax credits, Child Benefit and other reliefs and allowances. This spending may be unpredictable and is more challenging to control, so it requires careful monitoring. HM Treasury reviews these budgets annually and we base our forecast on published Office for Budget Responsibility data.

Trends in AME

In 2023 to 2024, total AME expenditure was £33,274 million across Child Benefit, tax credits and other benefits, reliefs and allowances. Figure 23 shows our AME summary trend from the last 5 financial years.

Figure 23: AME summary by type of expenditure (note 1)

Note 1: Numbers may appear not to sum due to rounding.

Overall, 38% of our AME expenditure was on Child Benefit payments, totalling £12,510 million in 2023 to 2024 and supporting 11.9 million children. Total payments have increased compared to the previous year, driven by the increase in Child Benefit rates that came into effect from April 2023. We paid out £7,307 million in tax credit payments to 0.6 million families, a further decrease of £1,528 million as customers migrate to Universal Credit, administered by the Department for Work and Pensions.

We spent £12,053 million on Reliefs and allowances which includes Corporation Tax reliefs, primarily for research and development relief and film tax relief. There was further expenditure on Tax-Free Childcare, Lifetime ISAs, Help to Save benefits, and payments in lieu of tax relief to certain bodies which are included within ‘Other AME expenditure’.

Variances between AME budget and expenditure

In 2023 to 2024, we spent £33,274 million, against a budget of £36,380 million, on annually managed expenditure. This was an underspend of £3,105 million. Any underspend is returned to HM Treasury.

Table 5: AME variances between budget and outturn (note 1)

	Funding £m	Outturn £m	Variance £m
Total annually managed expenditure	36,380	33,274	-3,105

Note 1: Numbers may appear not to sum due to rounding.

Our AME budgets are more flexible as they provide funding for volatile or demand-led expenditure, which is more difficult to control. A key factor behind our underspend was lower spending on tax credits due to the migration of claimants onto Universal Credit. There was also a slight underspend within Child Benefit, where expenditure was lower than we had forecast when the budget was set. Other reliefs and allowances related to Corporation Tax reliefs expenditure were also less than budgeted.

How we delivered value for money

We have a duty to use public money responsibly and we demonstrate value for money in several ways – for example, by comparing the tax revenue we collect with the cost of collecting it and by achieving efficiency savings to reduce our costs.

Our progress in delivering efficiencies

We achieve sustainable efficiencies when we improve how we carry out a process or activity to deliver a permanent cost reduction, while maintaining or improving existing performance levels. Our track record of delivering efficiencies is strong. In the 5-year period since 2019 to 2020 (which spans 3 Spending Reviews) we have delivered total sustainable efficiencies of £634 million – for example, by improving our internal processes and making savings on our IT and estates. As a result, our costs are £634 million lower than they would otherwise have been.

Figure 24: 5-year view of cumulative sustainable efficiencies

Year	£m
2019-20	120
2020-21	220
2021-22	351
2022-23	468
2023-24	634

In 2023 to 2024, the second year of the current Spending Review period, we delivered new sustainable efficiencies of £166 million, achieving these broadly through: people and productivity savings (generated through improvements to internal processes, and subsequent changes in productivity and staffing levels), IT savings, and estates savings.

Modernising our IT estate and replacing existing IT contracts with new, more efficient services and suppliers delivered £42 million of efficiency savings in 2023 to 2024, while our locations programme delivered an additional £14 million, by enabling better use of our estate and bringing colleagues together in regional centres. We also saved £18 million by optimising our use of office space and sub-letting to other government departments. We delivered £92 million through people and productivity savings – for example, by tackling compliance risks more effectively and supporting customers to get their tax affairs right at the outset.

The Single Customer Account (SCA) programme delivered £9 million of efficiency savings in 2023 to 2024 through improvements to customer digital interactions, making it easier for new parents to claim Child Benefit online and existing customers to view their entitlement and change bank details.

Figure 25: Breakdown of 2023 to 2024 efficiency savings by category

Our Spending Review 2021 (SR21) settlement required cumulative efficiency savings of £457 million per year by the end of 2023 to 2024. The impact of pressures such as inflation required us to find further savings to stay within budget, resulting in a revised target of £536 million by the end of 2023 to 2024, increasing to £719 million by 2024 to 2025.

While we achieved our original SR21 target, the revised £536 million target was more challenging, due to some delays in achieving savings and having to curtail spend on some activities that generate efficiencies.

While we can make ‘one-off’ savings to partially make up the shortfall and minimise any impact on our performance, our target for sustained efficiencies next year remains challenging as we cannot absorb every pressure we face. The increasing number of taxpayers in the system, many of whom have more complex tax circumstances, places yet more demand on our customer service functions and compliance activities at a time when we are reducing our workforce and making efficiencies.

Tax revenues

Total tax revenues represent all money HMRC received (or was due to receive), less any money that we owed or repaid. They are driven by various factors, for example the overall level of activity in the economy and the rates of taxation, allowances and reliefs set by Parliament. Tax revenues are based on when a tax liability accrues. This is different to tax receipts, which are based on when a payment for a tax liability is received by HMRC. Figure 26 shows total tax revenues between 2019 to 2020 and 2023 to 2024.

Figure 26: Total tax revenues

During 2023 to 2024, we generated total revenues of £843.4 billion, £29.4 billion more than the previous financial year. Overall tax revenues have continued to increase, driven by economic factors such as growth in wages, profits and inflation as well as continued growth in the number of taxpayers within the tax system.

Income Tax and National Insurance contributions rose by £29.3 billion (6.8%) compared to 2022 to 2023, largely reflecting growing employment and average earnings growth. The Office for Budget Responsibility note that policy changes, including the decision to freeze some tax allowances and thresholds boosted revenues.

Corporation Tax revenues rose by £9.1 billion (11.3%) compared to 2022 to 2023, largely due to the increase in the main rate from 19% to 25% from April 2023. VAT revenues reduced marginally by £1.4 billion (0.8%) compared to 2022 to 2023.

Stamp duties revenues reduced by £4.0 billion (21.1%), broadly in line with the drop in the number of property transactions, Capital Gains Tax revenues reduced by £2.7 billion (15.9%), reflecting the volatility of asset sales, and Energy Profits Levy revenues reduced by £2.1 billion (45.7%), reflecting the fall in energy prices.

Read more on tax receipts over time in our annual bulletin of HMRC tax receipts and National Insurance contributions on GOV.UK. Tax receipt data for 2023 to 2024 is provisional until Summer 2024. Please note: receipts are on a cash basis and so represent when a payment for a tax liability is received by HMRC. This is different to tax revenues which are based on when the tax liability accrues.

Cost of collection

Table 6 shows that in 2023 to 2024, the cost of collecting taxes was 0.51 pence for every pound we generated in tax revenue, maintaining the amount it costs us at around half a penny for every £1 collected. There are many factors that impact the cost of collection and the static cost this year reflects both an increase in expenditure and an increase in revenue. The main driver is an increase in expenditure in Income Tax, Corporation Tax and National Insurance with higher than forecast inflationary pressures increasing the cost of our operations. Tax revenue was also higher in 2023 to 2024.

Table 6: Cost of collection trends from 2019 to 2020 to 2023 to 2024 (note 1)

Year	Pence
2019-20	0.51
2020-21	0.51
2021-22	0.50
2022-23	0.51
2023-24	0.51

Note 1: A change to the methodology for the overall cost of collection has been made in 2021 to 2022 and the ratio is now shown net of Customs and International Trade.

Our spending compared to total tax revenue in 2023 to 2024

Figure 27 shows what it cost to run HMRC in 2023 to 2024. For our expenditure of £7,227 million, we generated £843.4 billion of revenue for the UK’s public services and provided £33,274 million in financial support for tax credits, Child Benefit and other reliefs.

Figure 27: Total expenditure relative to total revenue

HMRC’s key risks in 2023 to 2024

Our Executive Committee manages 10 key risks to the delivery of our strategic objectives. Treating customers’ data securely is our highest priority, which is why we are addressing risks associated with the reliability of our technology, data protection and security. In 2023 to 2024, we made progress in managing these risks by remediating priority IT issues whilst continuing to modernise our IT infrastructure.

We continue to prioritise our customers’ experience and have delivered improvements to our online services, including enhancements to the HMRC app and the introduction of a new online Child Benefit claims service.

In 2023 to 2024, to meet our stretching departmental efficiency challenge, we reprioritised our change portfolio focussing on the most critical projects and critical national infrastructure. This has enabled us to mitigate short-term risk exposure whilst continuing to deliver longer term solutions.

Key risk 1: Technology Resilience and Reliability	Risk Exposure Assessment March 2024	Strategic objectives	Risk Exposure Assessment March 2023
A major IT failure or security breach that results from the current condition of HMRC’s IT infrastructure could harm our business operations permanently or temporarily, depending on the incident’s severity.	Red	Collect the right tax and pay out the right financial support, Maintain taxpayers’ consent through fair treatment and protect society from harm, Support government economic aims with a resilient, agile tax admin system	Red

Our IT infrastructure is evolving and adapting to meet increasingly complex demands, and we take opportunities to replace legacy IT infrastructure wherever possible. We have re-planned some remediation of our retained legacy IT infrastructure to support delivery of other departmental priorities, which has impacted some improvements to our systems, increasing the time it will take for our systems to reach tolerance. We continued improving our IT infrastructure within funding constraints, strengthening the defences of our critical services.

Our new technical health measurement methodology is helping us to prioritise, and a new Technical Health Programme is remediating our highest priority IT issues.

Key risk 2: Data Protection	Risk Exposure Assessment March 2024	Strategic objectives	Risk Exposure Assessment March 2023
Failing to comply with data protection laws may lead to a legal breach, leaving us unable to protect customer and staff personal data to the legally required level, nor help staff and customers carry out their rights under data protection law.	Red	Maintain taxpayers’ consent through fair treatment and protect society from harm, Support government economic aims with a resilient, agile tax admin system	Red

We have made progress in our compliance with data protection law by continuing to remediate our legacy IT systems and migrating some IT systems to cloud hosting. We have an information governance framework for managing personal data and have introduced data protection performance indicators to help us manage this risk and prioritise further work. Rescoping and reprioritising our change portfolio (see key risk 4) has impacted the pace at which we can reduce this risk, but we continue to prioritise activities that seek to achieve compliance with the Information Commissioner’s Office accountability framework.

Key risk 3: HMRC Security	Risk Exposure Assessment March 2024	Strategic objectives	Risk Exposure Assessment March 2023
Failure to operate our security processes and controls or manage our infrastructure and vulnerabilities effectively may expose our customers, people and assets to harm or misuse.	Red	Maintain taxpayers’ consent through fair treatment and protect society from harm, Support government economic aims with a resilient, agile tax admin system	Red

Although this risk is stable, there is strong pressure from a heightened threat landscape, so we need continued vigilance and effort in order to protect our IT infrastructure.

We continue to strengthen our security defences and are improving our resilience across our IT and physical estates. We are overcoming the challenges by remediating systems, strengthening security controls, maintaining good relationships with our suppliers and delivering modern, secure, and resilient technology. We are also giving our staff training on heightened threats like social-engineering and phishing.

We have a taskforce working to reduce the risk of insider threats and improve key personnel security processes. Work has been undertaken that improves how we assess security controls for protecting our physical assets such as our buildings. We continue to test our recovery plans, learning lessons to strengthen our preparedness and build future resilience.

Key risk 4: Delivering our Change Portfolio	Risk Exposure Assessment March 2024	Strategic objectives	Risk Exposure Assessment March 2023
The programmes within our change portfolio may fail to deliver the outcomes and associated benefits we agreed to as part of the government’s Spending Review 2021. This, in turn, may harm our ability to deliver the ambitions set out in our strategic roadmaps.	Red	Collect the right tax and pay out the right financial support, Make it easy to get tax right and hard to bend or break the rules, Make HMRC a great place to work, Support government economic aims with a resilient, agile tax admin system	Red

Although this risk remained red in 2023 to 2024, our actions have subsequently improved the overall level and trajectory of risk, as demonstrated by the successful delivery of most of our in-year portfolio outcomes.

To meet our funding and efficiency challenges (referenced in risk 5), we reprioritised our change portfolio, revised delivery timelines, and commissioned suppliers to find efficiency savings. We are implementing several mitigations to manage this risk, such as improving how we secure technical resource earlier, enhancing how we design and manage change, and changing recruitment processes so we have the right people working on priority projects.

Key risk 5: Efficiency Delivery	Risk Exposure Assessment March 2024	Strategic objectives	Risk Exposure Assessment March 2023
Failure to deliver our efficiencies in full will require one off savings to avoid a breach of delegated budgets, adversely impacting departmental performance and slow delivery of our vision.	Red	Collect the right tax and pay out the right financial support, Make it easy to get tax right and hard to bend or break the rules, Make HMRC a great place to work, Support government economic aims with a resilient, agile tax admin system	Red

We are well on track to achieve our cumulative efficiency target of £500 million, set at Spending Review 2021, by the end of 2024 to 2025 – but the impact of sustained above-plan inflation means our savings and efficiency target has now increased to £719 million. We have a strong track record of efficiency delivery, but the pace and scale of the additional savings required means our plan contains risk.

We have delivered efficiencies by improving processes and productivity within our compliance teams, and through major transformation projects such as remediating old IT systems and re-letting our big IT contracts. We also identified savings across our estate and sub-let accommodation to optimise use of office space. We continue to identify ways to permanently reduce costs so we can maintain or improve existing performance levels in future.

Key risk 6: Exploiting Information	Risk Exposure Assessment March 2024	Strategic objectives	Risk Exposure Assessment March 2023
Failure to exploit our data effectively could result in reduced revenue collection, tax gap widening and/or weaker customer service by failing to build analytical capability.	Red	Collect the right tax and pay out the right financial support, Make it easy to get tax right and hard to bend or break the rules	Red

We need to exploit data at scale to deliver our services to customers and ensure we collect the right amount of tax. However, we face significant issues with our data exploitation capability to improve it in line with external threats and innovations.

We have successfully migrated some of our major IT services to stable platforms, giving us more innovation, increased resilience, and improved security. We are building a Unique Customer Record to bring what we know about our customers together in one place. We have also begun building a better integrated view of the information we hold across multiple databases and platforms, making it cheaper and easier to utilise. Work to scan and index our priority information is underway. We are building the case for further investment to improve our access to information, enhance data quality, modernise analytical platforms, maintain core IT systems and catalogue our data.

Key risk 7: Customer Experience	Risk Exposure Assessment March 2024	Strategic objectives	Risk Exposure Assessment March 2023
We may fail to make customer experience improvements in line with our objectives. This would lead to us not fulfilling our vision to be a trusted, modern tax and customs department, with reduced compliance and lower satisfaction levels.	Red	Collect the right tax and pay out the right financial support, Make it easy to get tax right and hard to bend or break the rules, Maintain taxpayers’ consent through fair treatment and protect society from harm	Red

Generally, feedback about our online services is very good, with average customer satisfaction scores of 83.1%. However, customer dissatisfaction and trust in key areas, particularly our phone service, means that our assessment of the risk remains red.

We continued to deliver improvements to our online services, including our new online Child Benefit claims service. The HMRC app also has new functionality and was used 88.5 million times throughout 2023 to 2024. We recognise that we have more to do to improve customer experience and build public trust in the tax system, and we have received additional funding to improve the experience our customers have when dealing with us.

We are listening and responding to customer feedback and focusing on ways to make the tax system easier to use through better guidance, simpler processes and encouraging more people to use online services for simple tasks – while ensuring options are available for customers who need extra help.

Key risk 8: Capacity and Capability	Risk Exposure Assessment March 2024	Strategic objectives	Risk Exposure Assessment March 2023
HMRC may not deliver its business objectives or respond to unplanned events if it does not have, or cannot attract, the skilled and/or available workforce it needs in the future.	Amber	Maintain taxpayers’ consent through fair treatment and protect society from harm, Collect the right tax and pay out the right financial support	Amber

We continue to develop our skills and capability, including focusing on enhancing digital skills and building change leadership. We have identified the high-level capabilities we need for the future in the areas of tax, compliance and digital skills and we have further developed the content of our learning academies, along with a strategy for refining senior leadership skills. We also continued to roll out our managers’ development programme. We are building our strategic workforce planning capability and we are gaining insights into local labour markets surrounding our regional centres. This strengthens our ability to attract and retain talent by focusing our recruitment efforts on the right locations.

Key risk 9: Engagement and Culture	Risk Exposure Assessment March 2024	Strategic objectives	Risk Exposure Assessment March 2023
HMRC may experience sub-optimal performance and/or high levels of attrition if the workforce are not actively led, motivated or engaged.	Amber	Maintain taxpayers’ consent through fair treatment and protect society from harm, Collect the right tax and pay out the right financial support	Amber

To respond to reductions in our engagement scores we are aiming to create an environment where employee feedback is not only encouraged, but also systematically gathered and acted upon. This is being delivered through the employee listening programme, which will continue to be rolled out to staff across the next year. Our People Plan is identifying levers to improve our employee experience, so we can retain our skilled workforce and reduce attrition rates.

We have continued to use internal communication to enhance the engagement of our workforce, while introducing new tools to support collaboration, attendance management and digital literacy. We also provided support for managers on leading remotely located teams, performance management, engagement, and mental health.

Key risk 10: Windsor Framework	Risk Exposure Assessment March 2024	Strategic objectives	Risk Exposure Assessment March 2023
There is a risk that HMRC will not be able to fully deliver and implement government commitments on the Windsor Framework at the pace required to meet the deadline of September 2024, and that by prioritising delivery of the Windsor Framework we impact on our wider priorities.	Amber	Support government economic aims with a resilient, agile tax admin system	No assessment in March 2023

We are continuing to deliver the requirements of the framework as planned. So far this has included replacing the previous UK Trader Scheme with the new UK Internal Market Scheme, allowing more UK businesses to avoid costly tariffs. We resolved long-standing issues relating to the Tariff rates for steel, and we have also worked to ensure that Northern Ireland benefits from the same VAT reliefs and alcohol duties as the rest of the UK.

Sir Jim Harra KCB
Chief Executive and First Permanent Secretary
26 July 2024