HM Revenue and Customs is moving into the harder stage of its technology modernisation, where growing digital use must be matched by legacy system replacement, better customer data, and measurable improvements for people and businesses dealing with the tax authority.

HMRC’s 2025–26 annual report says 78% of customer interactions are now digital, compared with 65% five years earlier. The department wants the figure to reach 90% by 2030, while retaining additional assistance for people who cannot use standard online channels.

Its mobile application had 7.6 million users during the year, an increase of 28.6%, while telephone performance improved after several years of poor service. HMRC says 85.1% of customers who wanted to speak to an adviser had their call answered, with the average wait falling below 10 minutes during March 2026.

Technology investment includes a next generation, AI enabled contact centre and procurement of an enterprise customer relationship management platform. Both are expected to enter phased operation during 2026–27, with the CRM intended to give staff a more consistent account of customer interactions across channels.

The department is also working on core tax and customs systems, cloud migration, Making Tax Digital, electronic invoicing, and the redesign of online services. Its annual report executive summary says AI and advanced analytics contributed to the protection or recovery of £10 billion in tax, a departmental attribution spanning several compliance activities rather than a single model.

HMRC appointed its first chief AI officer in April 2026 and is extending analytics into areas including customs guidance. Errors can affect tax liabilities, payments, investigations, and the ability to resolve a dispute, which means automated recommendations need traceability even when a human member of staff retains formal responsibility.

Digital volume can hide unresolved work

The proportion of interactions completed online is a useful operational measure, although it does not reveal whether a service was simple, accurate, or completed at the first attempt. A customer who fails online and then telephones generates two interactions rather than one, while a mandatory digital process can raise adoption without improving the experience.

HMRC serves around 40 million individuals and 5.7 million businesses, ranging from employees with straightforward affairs to agents, landlords, traders, employers, and multinational companies. A common digital environment must handle complex legislation while giving staff enough context to manage exceptions and correct mistakes.

An enterprise CRM may reduce the need for customers to repeat information and help advisers see previous contact, but achieving a dependable view requires records from older systems to be matched correctly. Weak identity resolution can merge information belonging to different people or leave an adviser with a partial history presented as complete.

Data quality and permissions consequently become service and security issues together. Staff need enough information to resolve a case, while access has to remain proportionate in a department holding detailed records of income, employment, business activity, payments, and family circumstances.

The AI enabled contact centre introduces similar trade-offs. Automated routing, transcription, summarisation, and assistance may reduce handling times, but generated summaries can omit qualifications or introduce errors. Employees need to know which record is authoritative, how to amend an output, and whether a customer can challenge information retained from an earlier conversation.

Legacy retirement will determine whether modernisation eventually reduces cost. Government departments often add new interfaces while keeping old systems running underneath because historic records, tax rules, and integrations cannot be moved safely in one programme.

Parallel operation protects continuity, though it also creates duplicate expenditure, complex interfaces, and demand for technical skills that are becoming scarce. Modernisation becomes an expanding layer of new technology rather than a replacement programme when each migration ends with the original platform still in use.

Cybersecurity cannot be deferred until the redesign is complete. HMRC says it blocked approximately 23.35 billion potential IT threats during the year, most automatically, and removed more than 26,000 websites and social media accounts impersonating the department.

Those figures describe volume rather than the probability of a serious incident, but they show why resilience must be built into every customer journey, data connection, and supplier contract. Tax records are attractive to criminals and difficult for individuals to replace after compromise.

HMRC’s progress will become visible through fewer avoidable calls, quicker resolution, stable online services, accurate case histories, and the retirement of costly systems. Moving demand online is part of the programme; changing the technology and operating model underneath it is where the larger financial and service gains must still be found.