HMRC Explained: What It Does and Why It Matters

What is HMRC? If you pay tax in the UK, the answer to that question is more relevant to your finances than you might expect.

HMRC — which stands for HM Revenue and Customs — is the UK government’s tax authority. It is the body responsible for collecting taxes, distributing certain benefits, and making sure that businesses and individuals meet their financial obligations to the state.

Understanding what is HMRC and how it operates could help you manage your tax position with greater confidence. Many people deal with HMRC throughout their working lives without fully grasping its scope or how it affects them.

This guide covers what is HMRC, how it was formed, which taxes it oversees, and how to contact it when needed. You’ll also find an overview of its online services and what happens when tax has been overpaid.

Knowing what is HMRC is a practical first step. Whether you’re employed, self-employed, or running a business, HMRC touches your finances in some way each year.

What Is HMRC and How Did It Come About?

HMRC was created in April 2005. It emerged from the merger of two established government departments: the Inland Revenue and HM Customs and Excise.

The Inland Revenue had handled direct taxes, including income tax and corporation tax. HM Customs and Excise had managed indirect taxes and import duties.

Bringing these departments together created a single tax authority. The goal was to cut administrative duplication and build a more efficient system for collecting tax across the UK.

HMRC is a non-ministerial government department. It operates independently of day-to-day ministerial direction, though it reports to the Chancellor of the Exchequer, who carries overall responsibility for UK public finances.

Its main offices are in London, with operations across the country. HMRC employs tens of thousands of civil servants to deliver its services and enforce tax compliance.

What Taxes Does HMRC Collect?

Collecting tax is the core function of HMRC. The revenue it gathers funds public services, from the NHS to transport infrastructure.

HMRC oversees a wide range of taxes. At least one of these is likely to apply to your own financial situation at some stage in your life. The most common include:

• Income Tax — charged on employment income, pension income, and rental income, collected through PAYE or Self Assessment.
• National Insurance — contributions from employees, employers, and the self-employed that count towards the state pension and certain benefits.
• Value Added Tax (VAT) — a 20% consumption tax on most goods and services, collected by VAT-registered businesses on behalf of HMRC.
• Corporation Tax — levied on the profits of limited companies and certain other organisations.
• Capital Gains Tax — payable on profits from selling certain assets, including shares and investment property.
• Inheritance Tax — charged on a deceased person’s estate where its total value exceeds the applicable threshold.
• Stamp Duty Land Tax — due on property purchases in England and Northern Ireland above set value thresholds.

HMRC also administers customs duties on goods crossing UK borders. This responsibility was inherited from HM Customs and Excise at the time of the merger.

How the PAYE System Works

For the majority of employees, PAYE is the main way income tax reaches HMRC. PAYE stands for Pay As You Earn.

Under PAYE, employers deduct income tax and National Insurance from wages each pay period. Those deductions are submitted directly to HMRC before the employee receives their net pay.

HMRC assigns each employee a tax code. That code instructs the employer on how much income to treat as tax-free and at what rate to tax the remainder.

An incorrect tax code can lead to too much or too little tax being taken. Checking your tax code on your payslip or through your Personal Tax Account is a straightforward way to catch any errors early.

Tax Allowances and Reliefs That HMRC Administers

HMRC does not only collect tax. It also administers a range of allowances and reliefs that can reduce the amount of tax you owe.

Some allowances are applied automatically through your tax code. Others require you to submit a claim. Being aware of what’s available is worthwhile, as unclaimed relief is money left on the table.

Common tax allowances include:

• The Personal Allowance — the amount of income you may earn each year before income tax applies. For the 2025/26 tax year, this is £12,570.
• The Marriage Allowance — one partner in a marriage or civil partnership can transfer part of their unused Personal Allowance to the other.
• The Personal Savings Allowance — basic rate and higher rate taxpayers may earn a set amount of savings interest each year without paying tax on it.
• The Trading Allowance — a £1,000 annual relief for individuals with small amounts of self-employment or casual income.

Tax relief may also be available on pension contributions and charitable donations made through Gift Aid. The rules vary depending on your tax rate and the nature of the contribution.

Other Responsibilities Beyond Tax Collection

Tax collection is the most visible part of what HMRC does, though its remit extends further than many people realise.

Child Benefit is administered by HMRC. Eligible families with children under 16 may receive weekly payments. The upper age limit extends to 20 for young people in approved full-time education or training.

Tax Credits, including Working Tax Credit and Child Tax Credit, are still managed by HMRC for those who have not yet moved to Universal Credit.

HMRC enforces the National Minimum Wage. Employers who pay below the legal minimum face investigation and could receive financial penalties.

HMRC also oversees the Construction Industry Scheme (CIS), which governs how payments are handled between contractors and subcontractors in the construction sector.

HMRC Online Services: Managing Your Tax Digitally

HMRC has expanded its digital services considerably in recent years. Many routine tax matters can now be handled online without needing to call or write.

The Personal Tax Account gives individuals online access to their personal tax details. You can check your tax code, view your National Insurance record, and see whether any overpayment or underpayment of tax has been recorded.

The HMRC app provides similar functionality on a smartphone. It is free to download from the App Store and Google Play.

The Business Tax Account allows companies and sole traders to manage multiple tax obligations in one place, covering VAT, PAYE, and Corporation Tax among others.

HMRC is also rolling out Making Tax Digital (MTD) — a phased programme that requires digital record-keeping and software-based submissions. Further details are available on the Making Tax Digital for Income Tax guidance on GOV.UK.

HMRC Contact Numbers: Reaching the Right Department

Calling HMRC can take time, especially at busy periods. Using the correct number for your query gives you the best chance of reaching the right team promptly.

Lines are typically open Monday to Friday, 8am to 6pm. Checking the HMRC website before calling is advisable in case hours have changed. The main numbers are:

• Income Tax and PAYE enquiries: 0300 200 3300
• National Insurance enquiries: 0300 200 3500
• VAT enquiries: 0300 200 3700
• Child Benefit enquiries: 0300 200 3100
• Tax Credits enquiries: 0345 300 3900

A full list of HMRC contact details by department is available on the HMRC contact page on gov.uk. Using online services first is often faster, as they are available outside of standard phone hours.

What Is HMRC’s Role When You’ve Overpaid Tax?

HMRC is responsible for returning tax that has been overpaid. Overpayments can arise from a wrong tax code, a mid-year job change, or expenses that were never claimed.

In some circumstances, HMRC identifies an overpayment and issues a refund without prompting. In others, the taxpayer needs to make a claim directly.

HMRC typically sends a P800 tax calculation to those it believes may have overpaid or underpaid in a given year. This sets out how tax was calculated and whether money is owed or due back.

The general deadline for claiming a tax refund is four years from the end of the relevant tax year. Allowing that window to close without making a claim could mean losing a refund you are legitimately owed.

HMRC Scams: How to Spot Fraudulent Contact

Scammers frequently impersonate HMRC to trick people into handing over money or personal information. These scams arrive by phone call, text message, email, and even post, and they can appear highly convincing.

HMRC reported receiving over 135,500 scam reports in a ten-month period, including nearly 29,000 relating to fake tax refund claims. Knowing the warning signs could protect you from becoming a victim.

What HMRC Will Never Do

Genuine HMRC communications follow strict patterns. If a message or caller does any of the following, treat it as suspicious:

• Threaten immediate arrest or legal action over the phone — HMRC does not use threatening language to demand urgent payment.
• Ask for personal or financial details by text or email — HMRC does not request passwords, PINs, or bank details through these channels.
• Offer a tax refund via email or text and ask you to click a link — genuine refund notifications come through your Personal Tax Account or by post.
• Demand payment by gift card, voucher, or cryptocurrency — these are not legitimate payment methods for any genuine tax debt.
• Contact you via WhatsApp or social media to discuss your personal tax affairs.

How to Report a Suspected HMRC Scam

If you receive a suspicious communication claiming to be from HMRC, do not click any links or share any information. Report it using the appropriate channel:

• Suspicious emails: forward to [email protected] then delete.
• Suspicious texts: forward to 60599 then delete.
• Suspicious phone calls: report via GOV.UK by searching ‘report an HMRC scam’.
• If you have lost money or shared bank details: contact your bank immediately, then report to Action Fraud on 0300 123 2040.

You can also check whether a communication is genuine using HMRC’s guidance on the HMRC scams guidance page on GOV.UK.

What Is HMRC? Your Key Points at a Glance

HMRC touches almost every aspect of personal and business finance in the UK. From income tax on wages to VAT on purchases, its reach is wide and its role is fundamental to how public services are funded.

Understanding how HMRC operates and which taxes it manages could help you approach your own finances with more clarity. Knowing where to look, who to contact, and what allowances might apply is a practical advantage for any taxpayer.

For more detail on income tax rates and how your earnings are taxed, visit the income tax rates guide on taxrebateservices.co.uk.

Key Takeaways

• HMRC stands for HM Revenue and Customs. It was formed in 2005 from the merger of the Inland Revenue and HM Customs and Excise.
• HMRC collects a broad range of taxes including income tax, National Insurance, VAT, Corporation Tax, and Capital Gains Tax.
• Most employees pay income tax through PAYE, with deductions taken directly from wages by employers and passed to HMRC each pay period.
• HMRC administers tax allowances and reliefs that can reduce what you owe. Some apply automatically; others require a formal claim.
• Digital services including the Personal Tax Account, HMRC app, and Business Tax Account allow many tax matters to be managed online.
• If you have overpaid tax, HMRC may refund it automatically or you may need to claim. The deadline is generally four years from the end of the relevant tax year.

Frequently Asked Questions About HMRC

The questions below reflect the most common queries people search when looking to understand HMRC and how it operates.

What does HMRC stand for?

HMRC stands for HM Revenue and Customs. It is the UK government’s tax authority, responsible for collecting taxes, administering certain benefits, and enforcing financial compliance. The ‘HM’ stands for His Majesty’s, reflecting its status as a Crown department.

When was HMRC created?

HMRC was established in April 2005. It was formed through the merger of two separate government departments: the Inland Revenue, which handled direct taxes, and HM Customs and Excise, which managed indirect taxes and import duties. The merger aimed to create a more efficient, unified tax authority for the UK.

What is the main HMRC phone number for income tax?

The main HMRC phone number for income tax and PAYE enquiries is 0300 200 3300. Lines are typically open Monday to Friday, 8am to 6pm. Where possible, HMRC encourages taxpayers to use its online services first, as these are available outside of standard office hours and can often resolve queries more quickly.

How does HMRC collect income tax from employees?

HMRC collects income tax from employees through the Pay As You Earn (PAYE) system. Employers deduct tax from wages before paying employees and submit these amounts directly to HMRC on or before each payday. HMRC assigns each employee a tax code that tells the employer how much income to treat as tax-free and at what rate to tax the remainder.

How can I tell if a message claiming to be from HMRC is genuine?

Genuine HMRC communications do not threaten arrest, request payment by gift card, or ask for personal or financial details by email or text. If you receive a suspicious message, do not click any links. Forward suspicious emails to [email protected] and suspicious texts to 60599. You can verify whether contact is genuine using the HMRC scams guidance on GOV.UK.

What should I do if I think I have overpaid tax to HMRC?

If you believe you have overpaid tax, you may be able to claim a refund. In some cases HMRC identifies overpayments and issues a P800 tax calculation automatically. In others, a direct claim is required. The deadline for claiming a tax refund is generally four years from the end of the relevant tax year, so reviewing your position promptly is worthwhile.