Policy paper

Better use of new and improved third-party data to make it easier to pay tax right first time

Published 21 July 2025

Who is likely to be affected

This measure will impact financial institutions and card acquiring service providers required to report customer data to HMRC and by extension the UK taxpayers to whom the data relates.

The improved data will be used to make the customer journey simpler for the compliant majority of customers and will reduce the opportunity for error or evasion for the non-compliant minority, for example by auto-registering customers to the relevant tax regime and pre-populating taxpayer returns.

The government is considering the case for exempting certain account types and data suppliers, such as civil society organisations, from the new reporting framework.

General description of the measure

This measure represents the first phase of the government’s reforms to HMRC’s bulk data gathering powers and safeguards, as set out in the Spring Statement 2025 Better use of new and improved third-party data to make it easier to pay tax right first time consultation. It focuses on improving the provision of two key datasets already reported to HMRC:

• financial account information — consisting of bank and building society interest and interest from other sources
• card sales — data shared by providers of card acquiring services, such as merchant acquirers

The proposed improvements are designed to ensure that HMRC receives the right data, of the right quality, at the right time by:

• introducing standing reporting obligations (replacing manual notices)
• increasing the timeliness and frequency of reporting
• standardising data submission with a set XML schema
• mandating suppliers to request, collect and report tax identifiers for matching to taxpayer records — such as National Insurance numbers
• imposing due diligence checks on data quality
• reforming the penalties regime to ensure compliance with the measure

The government plans to modernise the collection of further datasets in due course subject to further consultation. These may include:

• datasets already acquired by HMRC, such as data on rents and other payments arising from land and property
• the collection of data relating to dividends and other income from investments in line with exploratory questions asked in the consultation document
• other new datasets not yet consulted on

Policy objective

Improved third-party data will enable HMRC to provide the types of modern services offered by other international tax authorities to UK taxpayers. For example, being able to accurately pre-populate more sources of income in tax returns will reduce the administrative burdens that customers can face and make it easier to get tax right first time.

In addition, improved third-party data can give HMRC insight into those who undermine the fairness of the system by misrepresenting their income or hiding their assets. Making better use of available third-party data will enable HMRC to level the playing field and raise the bar on tax compliance, delivering revenue to fund our core public services.

Background to the measure

In 2021, the Office for Tax Simplification (OTS) published its report on Making better use of third-party data: a vision for the future.

In 2023 the government published its Tax Administration and Framework Review: Information and Data call for evidence, exploring proposals with stakeholders for how the government could update HMRC’s information and bulk data gathering powers. The consultation referred directly to several of the OTS’ recommendations.

This measure also draws on feedback to related consultations into the UK’s implementation of internationally agreed Organisation for Economic Co-operation and Development (OECD) reporting rules. These included Reporting rules for digital platforms (2021) and the Crypto-asset Reporting Framework, Common Reporting Standard amendments, and seeking views on extension to domestic reporting (2024).

At Spring Statement 2025, the government drew on insights from this broad range of work to publish an 8-week consultation on Better use of new and improved third-party data to make it easier to pay tax right first time. The government is today (21 July 2025) publishing draft primary legislation alongside a Summary of Responses document following stakeholder feedback to that consultation.

Detailed proposal

Operative date

The measure will have effect from no earlier than the start of the tax year 2027 to 2028.

Current law

This measure does not amend any current law.

Financial account information (consisting of bank and building society interest and other sources of interest), card sales data and some other datasets are currently collected by issuing a notice to relevant data-holders under schedule 23 of Finance Act 2011. The accompanying Data-gathering Powers (Relevant Data) Regulations 2012/847 specifies the relevant data to be provided by each relevant data-holder.

Proposed revisions

Primary legislation will be published in the Finance Bill 2025-26 to introduce a new obligation on third party data-holders to report data to HMRC for tax administration purposes. Secondary legislation will be made after the primary legislation receives Royal Assent. The data-holders in scope for the first phase of reforms will be:

• financial institutions and other providers of specific types of interest-bearing products and payments (schedule 23 of Finance Act 2011, paragraph 12)
• merchant acquirers and payment facilitators (schedule 23 of Finance Act 2011, paragraph 13A)

The legislation is being introduced to create a new recurring reporting obligation for certain types of third-party data-holders to provide data to HMRC to be used for risk assessment, tax compliance and administration. This includes a regulation-making power which will specify the data-holders who need to report data to HMRC, what data they need to provide, the format in which the data should be provided and when and how often the data should be reported. 

The government will continue to maintain the use of schedule 23 of Finance Act 2011 for data outside the scope of the new standing reporting obligations, and other ad-hoc requests.

Summary of impacts

Exchequer impact (£ million)

2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031
Empty	Empty	Empty	Empty	Empty	Empty

The final costing will be subject to scrutiny by the Office for Budget Responsibility and will be set out at a future fiscal event.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

HMRC will make use of better third-party data to deliver service improvements that make it easier for individuals to get tax right first time. For example, improved Pay-As-You-Earn (PAYE) coding, pre-population and tailored feedback in tax returns, and auto-registering customers for the relevant tax regime.

Some individuals will have to provide National Insurance numbers and VAT registration numbers (where applicable) for some interest-bearing products they hold with in-scope financial institutions (such as banks and building societies), and for accounts they hold with card acquiring service providers.

The measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

Almost all individuals over the age of 16 and in work are expected to have a National Insurance number. Individuals who do not have a National Insurance number but are eligible will be expected to apply for one and provide it to the financial institutions or card acquiring service providers that they hold an account with. We expect this to impact a very small number of individuals, and foreign nationals may be more likely to be affected.

HMRC does not currently hold data on the protected characteristics of individuals impacted by this measure and so cannot determine conclusively if there are any other equality impacts. 

Impact on business including civil society organisations

Reporting financial institutions and providers of card acquisition services

This measure is expected to have a significant impact on the approximately 600 existing suppliers (including multiple subsidiaries) of financial account information, and 13 suppliers of card sales data, who already report under schedule 23 of Finance Act 2011. Impacts relate to introducing new standing reporting obligations, a defined schema, more regular reporting of data to both HMRC and customers (quarterly for providers of interest income data and monthly for card-acquisition service providers), and new tax identifier collection and due diligence requirements.

The move towards standing reporting obligations will also bring into scope smaller suppliers of card sales and interest income data who are not currently sent a notice under schedule 23 of Finance Act 2011. The cost of implementation is likely to be greater for such entities compared to those updating existing processes. The government is reviewing the case to exclude specific types of financial accounts or data suppliers from the new reporting framework. This includes the case for excluding civil society organisations, such as credit unions.

Discussions with industry confirm typical costs include, but are not limited to, one-off costs for:

• system and platform changes to meet schema requirements
• revised onboarding processes and an outreach programme for collection of tax identifiers
• updates to customer guidance and forms
• staff training

Ongoing costs include those relating to more timely reporting and additional due diligence checks.

For existing suppliers of data, this burden will be somewhat offset by a reduction in data quality queries to resolve and the advantages of a modern, substantially automated, service for data transfer.

The government will look to minimise burdens for data suppliers where possible, while also ensuring that the information reported is accurate and useful. The high-level approach has been subject to consultation and information from this and the government’s continued engagement with third-party data providers will be used to develop more detailed cost information as technical designs are progressed. An update will be provided at a future fiscal event.

Businesses (including individuals) who are in receipt of interest income or procure the use of card acquiring services

This measure will require businesses to provide tax identifier information to financial institutions and providers of card acquisition services, though the impact is expected to be minimal as some of this data is already collected during onboarding.

HMRC will use the third-party data to identify businesses that attempt to gain an unfair competitive advantage by evading tax. By tacking non-compliance, HMRC will support a level playing field between businesses.

HMRC will make use of better third-party data to deliver service improvements that make it easier for businesses to get tax right first time. This is expected to particularly benefit small businesses.

Operational impact (£ million) (HMRC or other)

There is an emerging estimated IT cost to HMRC of around £35 million. However, this is subject to further revision in line with the progression of detailed technical requirements.

Wider Full Time Equivalent (FTE) impacts and operational efficiencies are currently being developed further.

Other impacts

A Data Protection Impact Assessment is being undertaken.

Other impacts have been considered and none have been identified.

Monitoring and evaluation

Consideration will be given to evaluating the impact on customers, data suppliers and tax compliance of the policy after monitoring data have been analysed and collected.   

Further advice

If you have any questions about this change, please email the third-party data policy team at thirdpartydata@hmrc.gov.uk.