Home Open Banking & Finance HMRC completes open banking rollout and sets out new priorities

HMRC completes open banking rollout and sets out new priorities

HMRC: (clockwise from top left) self-assessment tax payments; the HMRC app; and the ‘Pay by bank account’ option (button) as visible to people when they go online to pay tax | Global Government Fintech

HM Revenue & Customs (HMRC) has completed its rollout of open banking across all tax payment types capable of supporting it – and set out its next priorities as it looks to further integrate open banking technology into its services.

The UK department created global government fintech history on 24 March 2021 when it introduced an open banking-enabled ‘Pay by bank account’ option (button) for people making online self-assessment tax returns  – believed to be the first time any government in the world had embedded open banking within its own operations. Payment of three further tax types via open banking – PAYE (Pay-As-You-Earn) payments (tax paid direct from workers’ salaries), corporation tax and value-added tax (VAT) – was made possible shortly afterwards. The number of tax types payable to HMRC by open banking reached 43 six months ago.

HMRC has now finished the rollout, covering ‘nearly 100 per cent’ of HMRC customers (people/organisations paying tax). The only sub-categories of taxes that cannot be paid by open banking are repayments of tax credit overpayments and income tax underpayments ‘as these are in the process of moving from one system to another’, as well as two types of stamp duty taxes that are handled clerically.

With the rollout across tax types now in the bag HMRC has this week provided a fresh update on its total ‘tax take’ to date via open banking; the take-up of other open banking-related services; and also its evolving open banking priorities. The department’s head of payments, Nick Down, has also spoken of “increasing interest” across UK government in using open banking.

To date, about 4.5 million tax payments worth about £12 billion (about $14.5bn) have now been made through open banking since the department launched its initial service (in March 2021). With 31 January marking the deadline for self-assessment tax returns, the first month of the year saw an (expected) spike in payments made via open banking. During January, HMRC received more than 860,000 open banking payments worth £2.3 billion ($2.79bn) – increases of 64 per cent in value and 47 per cent in volume compared to the same month in 2022.


HMRC’s open banking use explained

Open banking involves the use of open application programming interfaces (APIs) to enable bank account holders to share their financial data with third parties. A growing number of governments are seeking to encourage open banking in order to boost competition and innovative financial services. But the UK government is a pioneer in actually itself using open banking to receive payments.

In enabling people or organisations to make payments to government by this method HMRC is striving to make payments to government simpler and safer, and to save government money. The public purse should save on the resource associated with tracking down payments that fail to arrive because payers have entered their tax/payment reference or other information incorrectly (‘keying errors’), as well as saving on the interchange fee charged by card-providers.

HMRC’s use of open banking is being undertaken in partnership with fintech company Ecospend, which is providing the payments software to HMRC. The London-based firm (whose acquisition by Sweden-headquartered Trustly has recently completed) was successful in an HMRC’s first tender for open banking revealed by Global Government Fintech almost two-and-a-half years ago.

Ecospend’s brief, worth up to £3m (about $3.63m), sees the company contracted to provide ‘account-to-account’ payment software that allows HMRC to process payments, or, to use its technical acronym, launch PISP (Payment Initiation Service Provider) services. Before 24 March 2021, individuals and organisations making payments to HMRC have needed to open their banking software (for example, log in to their online bank account) and manually complete a bank transfer payment, also inputting their tax/payment reference.

Those opting to pay their tax via open banking ‘tick’ to provide consent for Ecospend to securely connect them to their online banking and initiate an authorised payment on behalf of HMRC (an ‘Open Banking Privacy Notice’ seeks to reassure users). The Ecospend-powered service uses validated and pre-populated payment details, enabling payments directly from a payer’s bank account. It is this automation that, its advocates believe, increases speed, reduces human error (for example, people mistyping their tax/payment reference), and also has the potential to reduce fraud.

‘Open to possibilities: governments bank on opening up financial services data’Global Government Fintech‘s ‘Open Banking and Open Finance: What Role – And Benefits – For Governments?’ webinar held on 15 March 2022 (HMRC’s Nick Down was among the speakers)

HMRC’s open banking next steps

In terms of open banking-related priorities, HMRC will ‘in the next few months’ be introducing the ability for customers who log into their online account to arrange for their payment to be initiated on a future date, ‘so that they can make sure their payment is paid by the due date without having to return to pay nearer the time’.

The department is also working with a growing number of accounting software providers with a view to enabling customers to pay by open banking when they submit their tax returns. The department says it has improved HMRC’s online filing pages to help customers to do so. In August 2022, the department was working with one accounting software provider on integrating open banking payments into its software – this number has risen to 10 (the providers must be registered on the ‘HMRC Developer Hub’, which launched seven years ago to help software developers to integrate their software with HMRC’s APIs).

Open banking-facilitated payments through HMRC’s mobile-phone app have also been increasing in number, with about 56,000 payments (amounting to about £126m) received in January 2023 made that way. Overall, 135,000 open banking payments (amounting to £206m) have come via the app. A QR (quick response) code system, which went live in January 2022 to enable people to begin a payment on a desktop computer and complete it on a mobile device ‘securely and seamlessly’, has been scanned more than 875,000 times.

The department is looking to make a greater variety of open banking-enabled payments available through the app. It is also continuing to explore making open banking payments available through the department’s webchat service.

Nick Down
Nick Down: “I’m seeing increasing interest in open banking across government”

“With an eye to the future, we are also exploring making our open banking APIs available to trusted partners so that people and businesses can pay HMRC and manage their payments as an integral part of managing their personal finances or business,” the department’s head of payments, Nick Down, told Global Government Fintech.

“Alongside HMRC working with external partners to create ways of doing this that reflect how people work and organise their lives, I’m also seeing increasing interest in open banking across government,” Down added. “That can only be a good thing, and HMRC will gladly work with other government departments considering implementing open banking, if we can help them by doing so.”  


‘Consistently reducing bank charge costs’

Down told Global Government Fintech in August 2022 that open banking could have saved HMRC around £500,000 in bank charges since implementation.

Asked this week for an updated assessment, he said: “We are very pleased with the impact that open banking payments have had, both of bank charges and on payment errors and the customer contacts they generate while they are being resolved.” 

“Open banking is one of numerous changes affecting costs, including the rapid evolution of UK payment and software options, people’s familiarity and confidence with payment system, and our introduction of other recent changes such as variable direct debits for employers and early elements of intelligent payment processing. It would be false science to try to distil open banking savings from all these system effects, but we have succeeded in consistently reducing bank charge costs and handling an increasing customer base with no increase in resources.”

HMRC’s embrace of open banking is part of a significantly bigger picture in terms of central government tax payments and collection in the UK. One high-profile element of this broader backdrop is the delayed rollout of the ‘Making Tax Digital’ (MTD) programme. This means that people will have to keep digital records of their accounts and send summaries to HMRC every quarter using HMRC-approved software, instead of filing one final return annually. MTD for VAT has already been implemented but, in December 2022, the government announced a ‘phased mandation’ for the mandatory use of software for income tax self assessment.


Global Government Fintech’s ‘Open Banking & Open Finance’ topic section

‘HMRC open banking rollout takes in 24 more tax types’ – our news story (30 August 2022) on HMRC extending its use of open banking to 24 further tax regimes during the first eight months of 2022

‘HMRC extends open banking payments to nine further tax regimes’ – our news story (11 January 2022) on HMRC extending its use of open banking to tax levied on property purchases (stamp duty), capital gains tax and gambling duties (as well as six further tax types)

‘HMRC reaches milestone as £1bn in UK tax paid through open banking’ – our news story (29 September 2021) on HMRC reaching a milestone on its open banking journey

‘UK’s HMRC extends open banking to payroll payments’ – our news story (26 May 2021) on HMRC going live with a further step in embedding open banking into its operations just weeks after introducing the ‘Pay by bank account’ option for people making online self-assessment tax returns

‘One small website button, one giant leap for payments to government’ – an analysis (6 April 2021) of HMRC’s introduction of its ‘Pay by bank account’ option for people filing online self-assessment tax returns


‘Open banking for tax payments: government case study’


The Global Government Fintech Lab 2023 will be held in Dublin on Thursday 18 May 2023. The Lab, our one-day event for senior public servants interested in exploring and implementing fintech solutions, is being organised in partnership with Ireland’s Department of Finance. The event, which is free to attend for all public servants, will feature keynote speeches, panels and breakout sessions focused on fintech-related opportunities and challenges for those working in central government, agencies and other public authorities.