Businesses and individuals currently filing a yearly self-assessment tax return will soon be able to access a ‘real time’ digital account in order to pay their tax bill throughout the year, similar to Pay As You Earn.
George Osborne, the Chancellor, recently announced that online accounts recording real time information would replace paper and online tax returns currently completed. The changes will take place as early as 2016, when 10 million individuals and five million businesses will change to the new accounts, and the plan is to complete the switchover by 2020.
What are the advantages?
It is believed that accounts will be submitted through the year, using a smartphone, tablet or computer. The account will calculate the amount of tax due at any point and it will be possible to pay what is owed at that time. According to the Chancellor, the new system will remove the stress of filing the annual tax return, as well as budgeting for and paying a large tax bill at the end of the year. The Chancellor has called the new system “a revolutionary simplification of tax collection”.
Taxpayers will be able to log in to their online accounts and provide information whenever they like, so that their tax bills will be correct at that time. Tax can also be paid on a regular basis. HMRC will add the information it receives automatically, like salary details, pension information and details from banks. The process will be automated wherever possible, with a business or individual being able to link bank details and software for accounting to their HMRC online accounts. Plans are in process so that it will be possible to link appropriate accounting software to the digital accounts by 2020. Manual tax returns can still be completed if required.
Who currently completes tax returns?
There are many reasons why you may need to complete a tax return and, if you are unsure, professional advice must be sought.
Anyone who is self-employed must complete a tax return annually. If expenses being claimed are £2,500 or above, or if you have income above £2,500 which isn’t taxed at source, you will need a tax return. Company directors or those who earn more than £100,000 also need to ask for a tax return, while earners above £50,000 and receiving child benefit are also now required to complete one. If you are unsure whether you fulfil the criteria for self-assessment, contact us here at The Accountancy Partnership for advice.
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