I've checked Hansard.
Irrespective of the voluntary 'gender identity' question, it does appear that the SEX question, which is mandatory, is not intended to capture biological sex, nor legal sex.
I've also checked the official ONS guidance.
We're effectively getting two questions on gender identity. One of which is deceptively entitled sex, is mandatory, and has only two possible answers.
Look:
Sex
What is your sex?
Select either “Female” or “Male”
If you are one or more of non-binary, transgender, have variations of sex characteristics, sometimes also known as intersex, the answer you give can be different from what is on your birth certificate.
If you’re not sure how to answer, use the sex registered on your official documents, such as passport or driving licence, or whichever answer best describes your sex.
A later question gives the option to tell us if your gender is different from your sex registered at birth, and, if different, to record your gender.
They are not asking for sex registered at birth. Nor legal sex. Nor biological sex.