Making tax easier...the end of the tax return...whatever HMRC like to call it, it means a change to the current tax system, and a change to how millions of us manage and pay our taxes.
Simply put, tax returns are being replaced by new personal tax accounts. Everyone who pays tax will eventually have a personal tax account, with all of their details in one place, similar to an online bank account. By early 2016, five million small businesses and ten million individuals will have access to their own digital tax account. Millions will no longer have to complete a tax return at all, while those with more complex tax affairs will be able to use their account to declare income and pay tax in year.
The roll-out for individuals is being phased in for people currently in the self-assessment system. More than a million customers have already been provided with an online Personal Tax Account. All personal taxpayers will have personal accounts by April 2016, as will all of the country’s five million small businesses, of which two million are already using the new system.
If you’re self-employed, a contractor or a higher rate taxpayer, you’ll know how time consuming and tedious filling in your self-assessment tax return can be each year. It should be music to your ears then that this process is set to change.
As of April 2018, businesses including the self-employed and landlords will have to update HMRC every quarter where this activity is their main source of income. That obligation to report quarterly will also apply where the money is a secondary source of income worth more than £10,000, and the main income is from employment or from a pension.
The new system is also being hailed as a major help for small businesses, which will be able to link their accounting software to their personalised tax account and have the option to pay as they go. This will give more certainty about what they need to pay and when, so they can manage their cashflow better.