It has long been speculated that HM Revenue and Customs (HMRC) is using artificial intelligence (AI) as part of its tax investigations, and it’s now confirmed that this is the case.

The regulatory body is using AI to monitor social media posts as part of its investigations into suspected tax cheats and dodgers. Safeguarding measures are in place to protect data, with HMRC clarifying that it is only being used for criminal investigations.

HMRC is adopting a more technological approach as part of its Digital Transformation roadmap, and they see AI as a very useful tool to help them build a case during investigations and ultimately take a step towards receiving any outstanding debts.

What does the AI help HMRC look for?

As noted above, HMRC is using AI to look at an individual’s social media activity. They hope the AI will help them uncover any discrepancies that they can use in their investigation against an alleged tax evader.

HMRC also looks at individual financial records and spending habits, which they can compare against what they see on social media.

This allows them to build evidence and conclude whether the individual they are investigating has the means to pay their outstanding tax debts.

They do stress that while they are using AI during their tax investigations, it does not replace human decision-making, and all AI activities are overseen by human investigators at HMRC.

How does AI impact HMRC’s processes?

HMRC believes the use of AI streamlines its processes and allows investigations to move at a quicker pace. They also want to help UK taxpayers and they believe AI can help with that.

HMRC is looking to develop tools that help taxpayers file their returns correctly and pay the correct amount of tax. One action they are expected to complete with the help of AI is streamlining information and simplifying their website guidance pages.

With HMRC continuing to push its digital transformation plans, you should expect HMRC’s use of AI to increase in the future as they modernise their services and how they operate.

Have you paid the correct amount of tax?

With HMRC confirming its use of AI in tax investigations, it is important that you have fulfilled your obligations by filing your returns on time and paying any outstanding tax bills.

HMRC is stepping up its measures to combat financial crime and tax evasion, so if you are unsure about any tax you pay, our expert team of tax advisors is here to help.

We can help you analyse your taxes, help you pay any debts and advise you on the best course of action, so you have a clear picture of your finances and current financial position.

For advice and support with all tax concerns, get in touch with our team.

After being paused during the pandemic, HM Revenue and Customs (HMRC) has announced the resumption of the Direct Recovery of Debts (DRD) policy.

It has returned in a “test and learn phase” as HMRC increases its powers to ensure individuals and businesses fulfil their tax obligations.

HMRC collected £858.9 billion in tax last year, with around 90 per cent of taxpayers and businesses paying their tax on time, but the outstanding tax became debt.

With HMRC reintroducing the DRD policy, they can focus on taxpayers and businesses who can pay their outstanding tax debts but are choosing not to.

As the DRD policy returns, it’s an important reminder to all taxpayers about filing your tax returns on time to avoid escalating debt and potential action from HMRC.

How does the Direct Recovery of Debts policy work?

DRD is an effective method used when a taxpayer or business has the funds available to pay their HMRC their outstanding arrears but are refusing to do so.

The policy enables HMRC to force banks and building societies to transfer funds directly from the individual’s or business’s account.

HMRC can use these powers when outstanding debts exceed £1,000. There are stringent safeguards in place and HMRC want to ensure that taxpayers and businesses do not suffer as a result of debts being paid off.

HMRC will only take action against individuals who have continued to ignore their attempts to make contact, have passed the appeal timetables and have established debts.

There are measures in place where taxpayers who dispute the amount owed to HMRC have the automatic right to appeal.

HMRC increasing its powers as it tackles outstanding debts

Taxpayers were warned during the Spring Statement earlier this year that HMRC would be reintroducing the DRD policy.

Having been paused because of the pandemic, the phased return of DRD is a sign of intent as HMRC emphasise its determination to tackle outstanding tax debts and ensure all taxpayers and businesses are paying what they owe.

However, as they reintroduce the DRD policy, HMRC has also reiterated its commitment to helping vulnerable people who are struggling to pay off their outstanding debts.

The DRD criteria is strict, but HMRC will support the debtor if they do meet it. The most vulnerable can be taken out of DRD altogether and offered extra advice and support from HMRC’s team.

DRD returning is an important reminder to all taxpayers

As HMRC increases its powers, it offers a reminder to all UK taxpayers about the importance of assessing your own finances and ensuring you have filed your tax return on time and paid any debts.

It isn’t easy because for many taxpayers and businesses, cash can be extremely tight at times, but it is your legal obligation to pay taxes on time.

Failing to comply and continuing to ignore HMRC has serious consequences, and now HMRC have the power to enforce your bank or building society to pay the debts.

You shouldn’t let things escalate to that level because help and support are available if you need tax advice.

We provide comprehensive advice and support to help you understand your tax obligations, look at your financial position and ensure you have the tools to pay your taxes on time.

For specialist tax advice and support, contact our team.

In last year’s Autumn Budget, Chancellor Rachel Reeves announced significant Inheritance Tax (IHT) reform, which would take effect from April 2026 and is expected to impact many individuals’ estate plans.

The changes taking effect early next year impact the Agricultural Property Relief (APR) and the Business Property Relief (BPR), in which the full 100 per cent relief from IHT will be restricted to the first £1 million of combined assets.

Time is running out for farmers and business owners to check their estate planning measures and ensure they have reduced the risk of facing a much higher IHT bill.

Preparation is key so having as much information on the reliefs and IHT can help you put measures in place to protect your estate and manage any tax concerns.

What did the Chancellor announce about APR and BPR?

The Chancellor confirmed the full 100 per cent inheritance relief will be restricted to the first £1 million of all combined agricultural and business property.

This means farmers and business owners whose combined assets meet the £1 million threshold face the prospect of an IHT bill, taxed at the standard 40 per cent rate.

The reform of APR and BPR is designed to make the rules in place fair and support small family farms and businesses.

The new changes are also in part linked to the Government’s need to balance its books, with Rachel Reeves needing to fix the current financial black hole and stimulate economic growth, while sticking to her own tight fiscal rules.

Unsurprisingly, the changes have not pleased farmers because not only do they face an increased IHT bill, but their succession and estate plans have been thrown into turmoil and their farm’s future put at risk.

Inheritance Tax collection continues to reach record figures, and these changes are expected to play a role in further revenue being generated from IHT.

How will the changes impact farmers and business owners?

The reform to the APR and BPR reliefs is going to impact the long-term succession plans of farmers and businesses.

Families would inherit the IHT debt once you pass away if the total assets combined are within the £1 million threshold. This means your family will need to find a way to pay the debts, which could mean dipping into farm profits or selling some of the land.

It will have a detrimental effect on your succession plans, meaning you may consider other options when organising your estate to avoid any unwanted IHT bills.

It won’t be as simple anymore to pass your farm or business down to the next generation because now they face the prospect of a tax bill. It leaves you in a position where you’ll need to consider the tax implications and implement measures to reduce the IHT risks.

Options to consider include gifting beneficiaries their assets early to reduce the overall estate value or putting your farm and other assets into a trust. This will help mitigate the IHT risks and ensure your beneficiaries receive their inheritance.

Preparation is key

With the changes taking effect in six months’ time, it is important that you are prepared and have organised your estate accordingly.

You don’t want to place extra financial pressure on your family, and planning ahead of time gives you the best opportunity to reduce the potential financial impact, and this is where our team can help.

We offer tailored tax advice to ensure you understand your legal obligations, how IHT works and how the changes will impact your estate. We give you the tools to make the right decisions that protect your interests as well as those of your beneficiaries.

Plan ahead of time by contacting our expert team of tax advisors.

HM Revenue and Customs (HMRC) has announced it collected £3.7 billion in Inheritance Tax (IHT) in the first five months of the financial year.

Collecting more than £200 million than at this stage last year, IHT is taking a grip on families, with the Office of Budget Responsibility expecting IHT revenue to hit a record £9.1 billion.

While it isn’t great news for UK taxpayers, it is better news for the Chancellor, Rachel Reeves, as she prepares her Autumn Budget and attempts to balance the Government’s books.

It is very important that you look at protecting your estate from IHT liabilities, especially with a lot of individuals getting caught out by the current measures. Protecting your estate gives you the best chance of avoiding any potential IHT bill.

Why has more Inheritance Tax been collected?

IHT figures for the opening five months of this financial year are up 5.7 per cent compared to last year.

The rise in IHT revenue is related to the continued freeze on the IHT nil-rate band. Frozen at £325,000 since 2021 and expected to stay the same until at least 2030, this is pushing more estates beyond the nil-rate band.

As soon as estates surpass the £325,000 nil-rate band, they become liable to pay an IHT bill, taxed at 40 per cent. With more estates becoming liable, the amount of IHT collected has increased.

Another significant factor is the tight fiscal rules in place. Because Labour and Rachel Reeves must stick to their own rules in place by not raising National Insurance and Income Tax for workers.

Because of this, the Chancellor has been forced to explore other options, and IHT has proven a fruitful avenue and this is evident with the rise in IHT revenue during the first months of this year.

Could Inheritance Tax revenue rise further?

With the Chancellor announcing significant changes to IHT in last year’s Autumn Budget, there is a wide expectation that IHT revenue will continue to climb.

During last year’s Autumn Budget, Rachel Reeves confirmed that from April 2026, there will be changes to the Agricultural Property Relief (APR) and Business Property Relief (BPR), in which the full 100 per cent relief from IHT will be restricted to the first £1 million of combined assets.

This is expected to push more farmers and agricultural business owners closer to the IHT nil-rate band, meaning they face a bill.

Also coming into effect from April 2027 is the classification of unused pension pots and death benefits as part of an individual’s estate. These values will be added to the overall value of an individual’s estate.

This is also likely to push estates beyond the IHT nil-rate band and make more estates liable for a bill.

With this year’s Autumn Budget taking place on 26 November, there could be further changes to IHT to come. While it is unclear at this stage what is to come, the Chancellor could explore this avenue once again in a bid to fix the Government’s financial black hole.

Protecting your estate is essential

With new regulations imminent and the number of estates becoming liable increasing, it’s important you take measures to protect your estate and reduce the risk of facing an IHT bill.

Our expert team of tax advisors can help you assess the value of your estate, explain IHT in detail and give you the tools to make the right decisions to protect your estate and ensure your beneficiaries receive their full inheritance.

For all Inheritance Tax concerns, contact our team.