We’ve previously written about HMRC “nudge letters” – or “one-to-many letters” as they are formally known.
These are letters sent by HM Revenue & Customs to groups of taxpayers, encouraging them to review their tax affairs in an effort to reduce non-compliance.
Over the years, we’ve seen a range of campaigns targeting different groups. These have included shareholders who may have undeclared dividend income, individuals holding crypto assets, and landlords with potential gaps in their reporting.
So, who’s behind these letters?
Behind the scenes, HMRC uses behavioural science to influence how people respond to their tax obligations. This approach is closely linked to the work of the Behavioural Insights Team – often referred to as the “nudge unit”.
Let’s break down what that actually means.
What are behavioural insights?
Behavioural insights focus on how people actually behave, rather than how we assume they behave in theory.
Traditional economics tends to assume that people make rational decisions. In reality, behaviour is shaped by a combination of habits, emotions, social norms, and even the way information is presented. Small changes in wording or structure can significantly influence how people respond.
HMRC defines behavioural insights as the study of what influences decision-making, drawing on behavioural economics and psychology. This is particularly relevant in a tax context, where encouraging timely and accurate compliance is critical.
What is the Behavioural Insights Team?
The Behavioural Insights Team was originally set up in 2010 within the UK government, as part of the Cabinet Office.
Its aim was simple but effective: to apply behavioural science to improve public policy and outcomes.
Since then, it has evolved into an independent, social-purpose organisation (now part-owned by Nesta), working with governments and public bodies, including HMRC, to design and test interventions that influence behaviour.
It’s widely known as the “nudge unit” because its approach is not about enforcement, but about gently steering behaviour in the desired direction.
How HMRC uses behavioural insights
HMRC has been applying behavioural insights for a number of years, not just in letters but across its wider communications and systems.
One of the most visible examples is the way tax reminder letters are written. Rather than relying on standard, generic wording, HMRC has tested variations that draw on social norms — for example, highlighting that most people pay their tax on time, or that others in the recipient’s area have already done so. These messages are designed to tap into the natural tendency to follow the behaviour of others, and they have been shown to improve response rates and accelerate payments.
More broadly, HMRC uses what are known as “nudges”. These are subtle adjustments to how information is presented or delivered, designed to influence behaviour without removing choice. This might involve personalising communications, simplifying forms, or carefully timing reminders to prompt action at the right moment. While each individual change may seem minor, the overall impact can be significant.
A key feature of this approach is that it is evidence-led. Much of this work is linked to the Behavioural Insights Team’s use of randomised controlled trials, where different versions of a letter or process are tested against each other. HMRC can then measure which approach produces the best outcome and roll that out more widely. This “test and learn” model allows continuous refinement of how the tax authority interacts with taxpayers.
Why HMRC uses behavioural insights
From HMRC’s perspective, the objectives are clear: to improve compliance, reduce late payments, increase efficiency, and do so in a cost-effective way.
Behavioural insights are particularly attractive because they can achieve these outcomes without the need for more aggressive enforcement or significant system changes. In some cases, simply changing the wording of a letter has resulted in substantial amounts of tax being paid earlier than would otherwise have been the case.
Is this something taxpayers should be aware of?
Yes – because it fundamentally changes the nature of HMRC’s communications.
Taxpayers are no longer just receiving neutral, informational letters. Communications are carefully designed, informed by behavioural science, and tested to maximise their effectiveness. That doesn’t make them misleading, but it does mean they are intentionally persuasive.
In many cases, these letters are also informed by data HMRC already holds. By the time a nudge letter is issued, there may already be indicators that something is missing or incorrect.
Final thoughts
The work of the Behavioural Insights Team reflects a broader shift in how government operates. Rather than relying solely on rules and enforcement, HMRC is increasingly using psychology, data, and experimentation to shape taxpayer behaviour.
For taxpayers and advisors, the key takeaway is simple: HMRC isn’t just enforcing compliance – it is actively designing it.
In practice, we often see clients come to us after receiving one of these letters, at which point HMRC may already have data suggesting an issue. For that reason, it is always better to review your tax position proactively. Penalties are typically lower when you come forward voluntarily, rather than waiting for HMRC to intervene.
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