HM REVENUE & CUSTOMS is the first government department to sign up to receive online software known as cloud.
The taxman has signed a contract with Skyscape Cloud Services to store all data online, in one place.
A spokesman for the taxman said: "Moving to cloud storage will provide cheaper, more secure and greener data storage for HMRC."
The change will mean moving information currently stored in local offices to cloud storage between autumn 2012 and early spring 2013.
HMRC's chief information officer, Phil Pavitt, said: "This change will save more than £1 million a year in running costs and will increase reliability and security of HMRC's internal IT services.
"The Skyscape contract is a major step for HMRC in moving away from traditional ways of working with large service providers. And it's a great example of how we're exploring smarter, more innovative solutions that make life simpler for us and help us provide a better deal for our customers."
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