Every month, the directors at McPhersons share some useful financial tips especially for Business in Hastings readers. This month, Ainsley Gill looks at the recent announcement regarding paper tax forms being replaced with digital accounts.
Changing over to digital could make it much easier for over 11 million taxpayers and 12 million companies.
The Chancellor, George Osborne announced the end of the paper annual tax form and he promises to bring in digital tax accounts for all individuals and small businesses.
These new tax accounts unveiled in the March Budget and will be accessible at any time from a computer, smartphone or iPad. They will perform just like an online bank account.
The Treasury are selling the idea as a concept that will make it much easier for the 11 million taxpayers and 12 million companies who currently fill in an annual tax form to pay the right tax at the right time without filing a return. It describes the current system as complex, costly and time consuming.
Many believe the digital process is more to do with transparency for the Government and Treasury. When people log on to their account, they will be able to see how their tax is calculated as HM Revenue & Customs automatically updates it with information from employers, the Department for Work and Pensions, pension providers and banks. People will be able to pay their taxes when it is most convenient to them by linking to a bank account and arranging payments by instalments or by Direct Debit.
Instead, firms will be able to provide details in ‘real time’, the Government will benefit from prompt payments from this up to date information.
This change should help growing companies who will no longer have to pay a ‘one off’ big end of financial year tax demand because HMRC has calculated their payments on the previous year’s information.
According to the Treasury, the switch will be completed by 2020. In early 2016, 5 million small businesses and the some 10 million individuals will have access to their own digital tax account (or their accountant may access it for them).
By 2017, the first group of people with simple tax affairs will no longer have to complete an annual return. By 2020, businesses will be able to link their accounting software to their digital tax account so they can feed in information as they choose.
People who currently do their tax return on paper can continue to do so if they wish, but over time this is thought to reduce in favour of digital returns.
Need more help?
This feature aims to give some informal hints and McPhersons are offering small businesses free advice so get in touch now to arrange your free meeting 01424 730000.