By
Stuart Kerr, Technology Correspondent,
LiveAIWire

In 2023, Austria’s finance ministry credited artificial
intelligence with generating around 185 million euros in additional tax
revenue, a figure published by the country’s Federal Ministry of Finance and
cited by the OECD in its 2025
review of AI in tax administration. That is what a machine can find
in the gaps people miss. It matters now because the same capability that
hunts for unpaid tax is quietly dismantling the annual ritual most of us
still dread: the tax return.

The Annual Tax Return Is Already Being
Dismantled

Tax authorities have moved faster than most people realise. The
OECD found that 29 of its 38 member countries already report using AI in tax
administration, drawing on its 2024 inventory of tax technology initiatives.
The work is no longer experimental. It runs underneath the systems millions
of citizens touch every year.

Britain is a clear example. From April 2026, HMRC’s Making Tax
Digital for Income Tax replaces the once-a-year self-assessment form with
quarterly digital updates for sole traders and landlords earning above a
threshold, according to GOV.UK
guidance. The familiar shoebox of receipts and the January scramble
are being replaced by software that reports as you go.

Several administrations already pre-fill large parts of a return
from data they hold, so that for many people the task shrinks to checking and
confirming figures rather than assembling them. The UK’s move to quarterly
digital updates pushes in the same direction, shifting the burden from an
annual act of memory to a continuous, software-assisted record. As that
pre-filling deepens, the moment when a taxpayer must actively compile and
submit their own numbers steadily recedes.

How Machines Already Do the Hard Part

The grind of a tax return is data entry, and that is precisely
what machines do best. The OECD’s review describes administrations using AI
virtual assistants to answer routine queries, and more recently large
language models to personalise and speed up interactions with taxpayers.
Where data already flows in from employers, banks and platforms, the return
increasingly fills itself.

The direction of travel is a system that knows what you earned before
you tell it. For a salaried worker whose income is already reported through
payroll, the case for asking them to declare it again every year grows weaker
each time the data pipes improve. The form survives today less because it is
needed and more because the law still asks for it.

Catching What Humans Miss

The other half of the shift is enforcement, and here the gains are
concrete. The OECD notes that tax administrations use AI to uncover hidden
patterns and connections between transactions, assets and taxpayers, and to
analyse unstructured material such as text and social media to flag possible
evasion. Austria’s 185 million euro figure is what that looks like on a
balance sheet.

The reach widens as the data pipes improve. The OECD reports that
more than 80 per cent of tax administrations are now developing application
programming interfaces that let their systems draw information directly from
banks, employers and software providers, rather than waiting for taxpayers to
type it in. Each new connection narrows the space between what you declare
and what the authority can already see, and it is that shrinking gap, more
than any single algorithm, that spells the end of the return as we know
it.

For honest taxpayers this is mostly good news, because every pound
or euro recovered from evasion is one that does not have to be raised
elsewhere. It also changes the texture of compliance. A system that
cross-checks your declared income against dozens of external sources in
seconds leaves far less room for the quiet rounding-down that paper returns
once invited.

The Accountant’s Job Changes, It Does Not Vanish

If the form disappears, what happens to the people who fill it in?
The likeliest outcome is not mass redundancy but a shift in what tax
professionals are paid for. Routine data entry and reconciliation, the bulk
of low-value compliance work, is exactly what automation absorbs first. What
it does not absorb is judgement: how to structure a business, when a
deduction is defensible, how to handle the genuinely ambiguous case no model
has seen before.

The OECD’s review frames AI in tax administration as a way to free
up human resources for higher-value work rather than to strip people out
entirely, and the same logic holds for the private sector. For an accountant
or bookkeeper, the lesson is to move up the chain toward advice and planning,
because the part of the job a machine cannot yet replicate is the part
clients will still pay for. The firms that treat Making Tax Digital as a
prompt to retool, rather than a threat to resist, are the ones most likely to
come out ahead.

What This Means for You

If you are a UK sole trader or landlord, the change is not
theoretical. HMRC estimates that more than 860,000 people fall into the first
phase of Making Tax Digital from April 2026, with the qualifying income
threshold dropping in later years to pull in many more, according to its
GOV.UK guidance. The practical steps are to check whether your combined
self-employment and property income crosses the threshold, choose compatible
software early, and start keeping digital records now rather than in a panic
next spring.

It is also worth getting comfortable with the software before the
deadline rather than after it, because the tools that file on your behalf are
only as good as the records you feed them, and a clean digital trail kept
through the year is what turns the new regime from a chore into a genuine
time-saving. HMRC has signalled a lighter touch on penalties in the first
year of the rollout, but that grace period is finite, and the businesses that
use it to build good habits will fare better than those that wait to be
chased.

For everyone else, the smart move is to treat your financial data
as something worth keeping clean and current, because the more your records
already match what the authorities can see, the less the coming systems will
trouble you. The same logic of letting software carry the routine load runs
through our guide to the AI
revolution in personal finance, and the broader rewiring of money
is covered in how
AI is rewiring global finance.

The Return Won’t Vanish Overnight, But Its Days Are
Numbered

The annual return will not disappear in a single budget.
Thresholds, exemptions and the sheer inertia of tax law mean a long
transition rather than a clean break, and plenty of people will be filing
some version of a return for years yet. The trajectory is hard to mistake,
though. As more income is reported automatically and more checks happen in
real time, the once-a-year declaration looks less like a necessity and more
like a habit the system has not yet shed. Within a decade the question may
not be how to file your return, but why you were ever asked to. For a sense
of how far automated money management could reach into daily life, see our
look at whether
AI can manage your wallet.

About the Author

Stuart Kerr is Technology Correspondent at LiveAIWire, covering
artificial intelligence, cybersecurity, and the social impact of emerging
technology. He publishes daily at LiveAIWire.com.