The administrative cost of the tax system

HMRC should take a whole-system view of the cost-effectiveness of the tax system when making administrative changes or advising on policy changes. HMRC should be clear when it is placing increased requirements on taxpayers or intermediaries about the estimated costs and benefits to each party, and explain the allocative efficiencies from any redistribution of responsibilities. If the burden on customers is to be increased, the assumption should be that HMRC costs will fall, unless there is a compelling reason why this should not be the case, such as revenue gains or service improvements. Similarly, it may be appropriate for HMRC to take on greater costs, where this reduces the overall cost of the system.

Ref Page 13, 23 a · Implemented Q4 2026-27

HMRC should publish its estimates of the costs of the tax system to businesses and individuals, and explore how it could identify the burdens on compliant individual taxpayers

Ref Page 14, 23 j · Implemented Q4 2025-26

HMRC should move quickly to establish clear responsible owners for the effectiveness and efficiency of each tax regime. These Regime Owners should have a complete picture of costs relevant to their tax regime, not just direct costs, to aid decision-making on issues relevant to their tax regime. As part of this they should analyse costs through different lenses such as cost per taxpayer, and monitor and respond to areas of high unnecessary cost such as process failures and design weaknesses.

Ref Page 13, 23 b · Implemented Q1 2026-27

HMRC should establish clear and measurable objectives for making changes to simplify the administration of the tax system. As part of its simplification strategy, HMRC should make a measurable commitment to reduce administrative cost burdens on customers, and published proposals should include an estimate of the costs being taken out of the system.

Ref Page 13, 23 c · Implemented Q2 2026-27

HMRC should develop efficiency and productivity measures to demonstrate that it is controlling costs independently of movements in revenue or increased budgets. Measures should include the cost and time to complete each activity and the ratio of activity to outcome. For example the cost to serve each taxpayer, the cost and time to deal with types of contact, query or case, and the additional revenue raised per compliance activity

Ref Page 13, 23 d · Implemented Q1 2029-30

HMRC should Increase levels of compliance yield per case worker with the aim to return to pre-pandemic levels of performance as soon as possible. Experienced caseworkers should be expected to generate yield levels closer to historic levels more quickly. HMRC should ensure that its benchmark for good levels of compliance yield per caseworker take account of historic levels, inflation, higher returns from relevant upstream activity, increased capability from digital investment, and skills and experience of staff. Overall HMRC should be aiming to increase productivity each year and ensure benchmarks are sufficiently stretching

Ref Page 13, 23 e · Implemented Q4 2029-30

HMRC should develop a clearer understanding of the costs and benefits of ?upstream? compliance activity, and identify where upstream measures will reduce the need for downstream compliance work.

Ref Page 14, 23 f · Implemented Q4 2026-27

HMRC should be more ambitious in how it can better work with intermediaries to reduce system costs. 2025 is the midpoint of the Tax Administration Strategy and this is an appropriate moment to include more on the role of intermediaries in terms of commitments to provide access to digital services on an equal footing with taxpayers, and set out how unregulated agents will be managed. This might involve both responding to agents? feedback, but also considering the level of compliance risk associated with different taxpayer representatives and the appropriate amount of compliance and quality assurance work.

Ref Page 14, 23 g · Implemented Q4 2029-30

HMRC should analyse whether cost and benefit estimates published in Tax Information and Impact Notes with significant expected impacts were accurate, to help refine future estimates, and publish the results where there are large variations between estimate and outturn.

Ref Page 14, 23 h · Implemented Q1 2026-27

HMRC should consider the feasibility of introducing more external scrutiny and independent challenge of the estimates of business impacts included in Tax Information and Impact Notes. For example, sharing more detail of costing assumptions, research and methodologies as part of external consultation exercises that follow budget announcements.

Ref Page 14, 23 i · Implemented Q4 2026-27