Back in 2015, the Chancellor talked about the “end of the tax return”. Sounds too good to be true, doesn’t it? Well, the way we all manage our tax affairs is changing; tax in the UK is going digital. In fact, HMRC has stated it aims to become the most digitally advanced tax administrator in the world by 2020. To make this happen HMRC are investing £1.3 billion in the new system.
So what do the changes actually mean to individuals?
It should be good news for most people. The introduction of one centralised, digital tax system will simplify things and make keeping up-to-date with individual or business tax easier. The changes mean that everyone will have access to their tax account online. For many of us, this seems like obvious progress. We have become accustomed to managing our banking and other financial services we use online. The changes mean we will be able to access our information in real time on any device anywhere in the world as long as we have an internet connection.
A significant advantage will be that HMRC will gather more of its information directly from sources such as banks, employers and government departments. This should mean that individuals won’t have to provide HMRC with as much information, reducing the administrative burden involved in managing tax affairs. By accessing your online tax account you should be able to see and check what information has been provided.
Taxpayers will be able to authorise an agent or accountant to manage their digital tax account. The taxpayer will still have access to their digital account and will see exactly the same information as their accountant.
For those who prefer not to deal with their financial matters online (and there are still many people out there who prefer to deal with paperwork), the change will be unpopular, to say the least. There are of course data security and privacy issues and anyone who has had personal experience of having their account hacked or their online identity stolen will no doubt have concerns about the changes.
HMRC have offered assurances that they will provide help and support for those who find the new system difficult but they believe it will make the process easier for the vast majority of people.
How will businesses be affected?
Businesses will be required to keep all their accounts online in a digital format and they will need to submit updates quarterly. A key change for many businesses will be that they won’t wait until year end to have a clear picture of what tax they owe, this should help prevent unexpected tax bills.
Businesses will be able to link their accounting software to provide feed data straight to their digital tax account which should help to streamline the process.
The new system will allow access to other government services, for example, individuals will be able to see how their National Insurance contributions affect their state pension. They have also said that other government services will be added to the system over time.
If you have any questions or concerns about the changes then get in touch and we will be happy to answer any questions you may have.