Written statement: Tax Update 2026: simplification, modernisation and fairness - June 23

Exchequer Secretary (Dan Tomlinson): Today the government sets out further reforms to simplify and modernise the tax and customs system, building on the commitment first made in the HMRC Transformation Roadmap published in July 2025 and confirmed at Budget 2025.

The measures announced today simplify rules, improve taxpayer guidance, and ensure more taxpayers can benefit from high-quality digital services. The changes, consultations and proposals announced today will help people and businesses to get their tax and customs right first time, while reducing burdens and improving certainty.

The government is acting to collect more revenue from those who don't play by the rules. This will help ensure taxpayers and legitimate high street businesses can compete on a level playing field. The government is consulting on reforms to Online Marketplace VAT Liability, further extending this liability to more effectively tackle non-compliance; bringing forward reforms to low value imports, first announced at Budget 2025, and taking targeted steps to tackle fraud from sales suppression systems, through consulting on new software standards.

Simplifying and modernising the tax system

The measures announced today support the government's long-term ambition for a simpler tax system, where rules are straightforward and easy to understand, and meeting tax obligations fits into how people run their lives and businesses. Together, these measures will improve how employer payroll and expenses operate, cut down on paper processes, and improve the overall experience for small businesses.

Key measures include:

• VAT treatment of land intended for social housing: The government is today launching a consultation on the introduction of a new zero rate of VAT for the sale of land intended for the construction of social housing. It is seeking views on how the current VAT rules work and how a new zero rate would support the delivery of social housing, helping reduce barriers to building new homes and supporting more households into safe and decent homes. The consultation will also help ensure any new tax relief remains fair and affordable.
• Review and uprating of Benchmark Scale Rates (BSR) and Overseas Scale Rates (OSR):BSR and OSR are optional flat rates that employers can use to reimburse employees for the cost of meals and other travel expenses when they travel for work in the UK (BSR), and for accommodation and meals when they travel overseas (OSR), without having to check every receipt. In response to stakeholder feedback, and following engagement with industry, the government will review HMRC's BSR and OSR. BSR will be reviewed with consideration to the current costs of travel. In addition, the review will look to understand if there is scope to simplify OSR with more alignment between both BSR and OSR.
• More Timely Payment for Income Tax Self Assessment (ITSA): As announced at Budget 2025, the government is today launching a consultation on implementing more timely payments in ITSA, including reforms for ITSA customers with Pay as You Earn (PAYE) income who will be required to pay more of their forecasted Self Assessment liabilities in-year through PAYE from April 2029. We are also consulting on the potential for more timely payments for other Self Assessment taxpayers by reforming Payments on Account. Spreading tax payments through the year into smaller, regular payments will help reduce tax debt and avoid taxpayers having to pay larger, infrequent and sometimes unexpected bills.
• Call for evidence on PAYE Settlement Agreements (PSAs): The government is taking proactive steps to simplify and modernise PSAs. As part of this review, HMRC is today publishing a call for evidence. The call for evidence seeks to improve understanding of how PSAs operate in practice, including how employers interpret the rules and where there may be complexity or uncertainty. The evidence gathered will allow an informed view of whether any changes are needed, with the aim of addressing unclear boundaries and inconsistent use and helping to reduce administrative burdens for employers and advisers.
• Consultation on modernising the distributions framework: The government is today launching a consultation to explore modernising the rules that determine whether a payment to a company's non-corporate shareholders falls within the distributions regime. This is to ensure the rules operate as intended and minimise distortions, without undermining commercial practice. The government is consulting because of the complexity of this area of the tax system, which in many cases has not been reformed since 1965, and the need to have a clear view of potential impacts before deciding whether to proceed.
• Digitising the option to tax process: Option to tax allows businesses to reclaim and charge VAT on land and buildings, which are normally exempt from VAT. In response to feedback from the Confederation of British Industry and the Institute of Chartered Accountants of Scotland, and through work with the Land & Property Liaison Group - an HMRCindustry forum - the government is improving the option to tax process by replacing paper-based routes with a new digital channel. This will incorporate industry requirements, including bulk uploads, for option to tax notifications, revocations and VAT registration cancellations.
• Consultation on the tax treatment of members of US Limited Liability Companies and other reverse hybrids: The government launched a consultation on 10 June 2026 on new proposals to remove double taxation from investments in certain types of overseas entity (including US Limited Liability Companies), where an unintended mismatch is resulting in high and unfair tax rates. This proposal is part of the wider work the government is doing to develop the UK's offer for globally mobile talent and ensure the UK is a great place to live and work.
• First Time Buyer ISA consultation: The government is committed to making the aspiration of home ownership a reality for as many households as possible. To support that ambition, the government is today launching a consultation on the implementation of a new, simpler ISA product to support first time buyers to buy a home. Once available this new product will be offered in place of the Lifetime ISA.
• Help to Save: The government confirms that the reformed Help to Save scheme will be delivered through a multi-provider model. Following consultation and engagement with stakeholders, this approach will enable financial institutions to offer Help to Save accounts directly to eligible customers, with the aim of improving visibility and access by embedding the scheme within the mainstream savings market. The government will continue to work with industry to support implementation of the reformed scheme.

HMRC is continuing to deliver on existing simplification commitments, including making its guidance clearer and easier to use. To support this aim, HMRC delivered over 4,000 updates and improvements to guidance last year to help more customers digitally self-serve and minimise complexity.

HMRC has also developed interactive guidance, which has won several awards for simplifying complex areas of the system by providing customers tailored, step-by-step journeys. Over the last 4 years, HMRC have built 118 of these journeys and in 2025-26, customer feedback shows that interactive guidance supports effective selfservice, with nearly 80% of respondents saying they were able to complete their task. This is supported by HMRC's data, which shows that over 96% of customers did not visit HMRC's Contact us' pages within five days of using interactive guidance.

HMRC is also continuing work through the Better Letters Together initiative, launched in July 2025, working with the Administrative Burdens Advisory Board (ABAB) to improve the clarity and quality of letters and emails sent to customes.

Simplifying and modernising the customs system

The government is committed to building a resilient, facilitative and modern customs system that promotes trade whilst protecting the UK and our economy. A customs system that gets the fundamentals right and adapts to modern international trade is key to trading with ease, now and into the future.

The measures announced today support ongoing administrative improvements to the customs regime, while laying the groundwork for future innovation and change. These measures collectively simplify customs processes and systems, support digitalised trade and improve trader experience; while protecting the UK border and domestic market.

The government remains committed to working with industry to deliver reforms and identify further opportunities to enhance the customs system.

Key measures include:

• Call for evidence on Customs Modernisation: The government has published a call for evidence to capture industry views on trade digitalisation and potential opportunities and challenges for the UK customs regime. This will explore key elements of the UK customs regime in the context of technological and regulatory change, to ensure we understand evolving trader practices and needs and continue to drive international trade.
• Digitalisation and AI Customs Pilots: Building on successful pilots with trade and US Customs and Border Protection, the government will test and scale innovations in the customs system. This includes design and delivery of services allowing HMRC to process Electronic Trade Documents for customs applications and participating in the next phase of the Department for Business and Trade's Digital Trade Corridors programme. These initiatives will support businesses to adopt fully digitalised trade. HMRC will also test how AI can support customs caseworkers to complete real-time border documentary checks, improving border flow and strengthening compliance.
• Improving the Quality of our Customs Intermediaries: The government is improving its support to good-quality intermediaries in the customs sector, through the launch of the previously announced standard for customs intermediaries which was published on 3 June 2026, development of a voluntary certification scheme for the standard and a new commitment to publish a consultation on mandating customs intermediary registration. This work will ensure the customs system is supported by a high standard of intermediary service.
• Digital ATA Carnets: The government has announced that the UK is one of the first countries to adopt digital ATA Carnets, from 1 June 2026. Digitising this 'passport for goods' makes it easier for businesses and touring artists to move goods between the UK and other countries temporarily without payment of import duties.
• Changes to the Duty Reimbursement Scheme for Northern Ireland goods: The government has introduced legislative changes to make it easier for businesses to reclaim at risk' duty paid on goods brought into Northern Ireland. The changes, which went live on 26 May 2026, are designed to enhance access to the scheme by directly addressing business concerns and also ease the financial burden on businesses where evidence of the final destination of goods takes time to materialise.

Strengthening fairness in the tax system and helping customers get their tax and customs right

Measures announced today also strengthen compliance and set out options to improve HMRC's ability to collect tax that is owed. This ensures fairness for the vast majority of taxpayers who meet their obligations and supports fair competition on the high street.

Key measures include:

• Reforming the customs treatment of low value imports: The government has listened carefully to representations made by industry and decided to accelerate delivery of the reforms by 6 months to October 2028 at the latest. In doing this, the government has sought to ensure all goods are adequately controlled while balancing the need to promote fair competition between high street and online retailers and giving businesses involved in the sales and movement of low value goods time to prepare for the changes and avoid border disruption. To give businesses as much certainty as possible about the new customs arrangements, the government will publish a consultation response shortly and start legislating for the reforms in this year's Finance Bill.
• Online Marketplace Liability: The government wants to tackle persistent VAT non-compliance among businesses selling on online marketplaces, both overseas and domestic, which undermine honest businesses that pay what they owe, and costs an estimated hundreds of millions in lost VAT each year. The government is therefore consulting on how to clamp down on this non-compliance by making online marketplaces liable for VAT on both UK and overseas business sales of goods. This reform would make it harder for overseas businesses to masquerade as UK-based to escape the current rules, and make sure UK businesses also pay what they owe. This consultation seeks views from online marketplaces, hot food delivery platforms and restaurants and sellers operating through those platforms.
• Electronic Sales Suppression Software Standards: The government is determined to tackle till fraud on the UK's high streets in which traders use payment systems to fraudulently under-report their income, and which is unfair to legitimate high street businesses. The government is launching a consultation on the introduction of software standards for Electronic Point of Sale and Mobile Point of Sale systems. This consultation seeks views from businesses, software developers and wider stakeholders on measures designed to prevent electronic sales suppression and support fair competition on the high street. The government aims to ensure any future approach minimises burdens on compliant businesses and delivers secure, reliable recordkeeping that prevents till fraud.
• Tackling lower value debts: The government is today launching a consultation on proposals to extend existing powers to enable recovery of lower value tax debts. This would apply to customers who can pay but have not responded to multiple contact attempts from HMRC. Each year, over 750,000 such debts, collectively worth more than £2 billion, remain uncollected after 9 months and more than 10 attempts to contact customers to pay what they owe. The proposals would enable HMRC to collect debts directly from customers' accounts in regular instalments, supported by a comprehensive suite of safeguards to ensure the power is used fairly and proportionately. This measure will help ensure those who can pay their tax debt do so, while maintaining trust and fairness in the tax system.

The full list of publications and announcements can be found at: https://www.gov.uk/government/collections/taxupdate-2026-simplification-modernisation-and-fairness