Digital ID debate: the pros, cons, and impact on your small business

A new digital ID scheme is set to be introduced across the UK by August 2029.

These digital IDs will be free to download and will be held on people’s phones – yet many are already objecting to the announcement.

But what effect will they have on small business owners and the self-employed?

Digital ID cards explained

The government plans to roll out a digital wallet which will hold both the proposed digital ID card and the digital driving licence, which was announced earlier this year.

The ID cards will include your:

name
date of birth
nationality or residency status
photo (for biometric security)

Streamlining access to tax services?

The digital ID cards will be designed to integrate with government services – including tax services. With just one ID stored on your phone, you should be able to log in and provide information for government services faster, without having to find physical copies of your documents.

The government states that the digital IDs ‘will cut lengthy time spent filling in forms and document scanning by verifying your identity in seconds, rather than days or weeks for processing’.

This is set to work for services in the private sector too, as you’ll be able to verify your identity faster when proving your age or opening a bank account.

Integrating with Right to Work checks?

One of the government’s driving factors in announcing the digital ID cards was the role they’d play in tackling immigration. By requiring these digital ID cards to be presented as part of Right to Work checks, the government hopes to ‘curb the prospect of work for illegal migrants’.

Small business owners who employ staff will be required to check digital IDs to prove residency as part of the hiring process.

Preventing identity fraud?

The government also hopes that introducing digital IDs will help to reduce identity fraud, as they’ll minimise the personal details you provide to services.

This follows the mandatory identity verification process on Companies House, which business owners will need to complete by 18 November 2025.

A controversial announcement

This isn’t the first time that the UK government has attempted to introduce ID cards – with Tony Blair proposing voluntary ID cards in the early 2000s.

The idea still proves to be unpopular, with many concerned about privacy and data security. To date, more than 2.4 million people have signed a petition against introducing digital ID cards.

Campaign group Liberty believe that: “Technological advancements mean that digital ID systems pose an even greater risk to privacy than they did when last proposed in the 2000s”.

“A single and unique ‘digital identity’ and centralising databases would remove much of the individual’s agency in managing their data. This information could be used to profile individuals across multiple datasets and would pose particular risks to marginalised communities.”

‘Deliver a fairer Britain’

Despite the objections to the scheme, Prime Minister Keir Starmer said: “Digital ID is an enormous opportunity for the UK. It will make it tougher to work illegally in this country, making our borders more secure. And it will also offer ordinary citizens countless benefits, like being able to prove your identity to access key services swiftly – rather than hunting around for an old utility bill.

“We are doing the hard graft to deliver a fairer Britain for those who want to see change, not division. That is at the heart of our Plan for Change, which is focused on delivering for those who want to see their communities thrive again.”

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