Digital accounts replace annual tax returns
Business owners throughout the UK need to be aware of major changes affecting their tax payments and recording.
Annual tax returns are to be replaced by new, real-time digital accounts for millions of individuals and businesses, as the UK tax system undergoes major reform. The new accounts will store each taxpayer’s details in one place, allowing the user to view and manage their taxes securely through their chosen device.
HMRC expects five million small businesses, along with ten million individuals, to have access to the new system by early 2016.
While more than 85 per cent of self-assessment tax returns are already submitted online, the changes aim to offer taxpayers a new level of clarity on how their taxes are calculated.
As well as providing a detailed overview of businesses’ total tax liabilities, the new digital accounts will mark “a revolutionary simplification of tax collection,” according to the Chancellor, George Osborne.
The new system will collect data about:
This will be stored in one place, saving taxpayers time in entering information that HMRC already holds.
By 2020, small businesses should also be able to benefit from a more streamlined system that allows them to feed data directly from their accounting software to their tax account.
Taxpayers remain responsible for checking their tax bills are correct, and declaring any information that is not reported by any other means.
Taxpayers will be able to authorise an agent to manage their digital account on their behalf.
The new accounts also offer an optional ‘pay as you go’ system, making life easier for the one in five businesses that admit to facing cashflow problems due to annual tax payments.
While taxpayers will be able to view what they need to pay and when, and will benefit from targeted help and support at the point at which it is required, those with more complex tax affairs will still have to input additional information through the existing online system.
Your tax specialist or accountant can help you prepare for, and further understand, the new tax processes.