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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.

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The chancellor has stated that he will attempt to bind future governments to maintaining a budget surplus at times when the economy is growing. George Osborne made his annual Mansion House speech and outlined his plan to make sure that governments run a surplus. In January, Osborne first proposed the changed to the fiscal policy.

The government plans to sell its stake in the Royal Bank of Scotland, the chancellor confirmed in his speech. Since the financial crisis, concerns over the national debt have doubled. However, the plan would legally prevent future governments from spending more than they receive in tax revenue whilst the economy is growing.

National debt refers to the amount of money owed by the UK government and has been built up over many years by different governments. During April this year, the national debt stood at £1.48 trillion, which is the equivalent of 80.4% of the UK’s annual economic output, the Office for Nation Statistics (ONS) announced. Back in 2008, the debt was about £600 billion, or 42% of economic output.

An independent watchdog called the Office for Budget Responsibility (OBR) will be responsible for policing the new rules. As well as this, the OBR is set to have the power to decide when the government should be able to spend more than it is taking in revenue.

A vote by the House of Commons will be taken concerning Osborne’s proposal and is due to take place later on this year.

George Osborne has stated that he will deliver a new Budget on the 8th July. He said that it would focus on raising productivity as well as living standards and that this unusual move of having a second Budget within a one-year period is to keep the commitments made to people in work.

The chancellor gave a broad outline of his plans for the next budget but would not comment on the details, including the Conservatives’ planned £12 billion of welfare cuts, Osborne said outside 11 Downing Street. The previous Budget was held on 18 March and included tax cuts for first-time house buyers. After this Budget, the independent forecaster in Institute for Fiscal Studies (IFS) stated that Osborne needed to say exactly how he could go ahead with his plans to cut £12 billion from welfare spending. Of these cuts, £2 billion were outlined ahead of the general election and all cuts are predicted to be in place between 2017 and 2018.

If the economy performs as forecasts made by the independent Office for Budget Responsibility say it should, borrowing will be reduced to £41 billion in 2016-17 and £14.5 billion in 2017-18. However, by 2018-19 the plan for the UK is to be running a budget surplus of £4 billion.

The Conservatives were under pressure form the Institute for Fiscal Studies (IFS) during the election campaign that wanted an explanation as to how they would find the remaining £10.5 billion, considering they gave details of how they will find £1.5 billion of savings from the UK’s social security budget.

The IFS said that the scale of the overall savings would involve the Conservatives looking at child benefit, child tax credit and disability allowances. The Budget would announce reforms of welfare that intended to protect the vulnerable while also making sure that the system is fair to taxpayers, according to the Treasury.

Osborne will say in the Budget that the Conservatives plan to have a fair and balanced approach to the deficit reduction and that the package will include a promise that spending on the NHS will be improved while cutting £13 billion from other Whitehall departments. In addition, designed to raise £5 billion will be a fresh crackdown on tax avoidance.

The timing of the Budget on the 8th July will mean that the Office for Budget Responsibility will produce new forecasts for the economy and the public finances. They will also give time for a finance bill to be passed.

The Chancellor of the Exchequer George Osborne has just delivered his last Autumn Statement to Parliament before the General Election in May 2015. chancellor

George Osborne insisted that the economy is in good health and borrowing is on target.

Here is a summary of what was announced today.

  • Stamp duty will be cut for 98% of people who pay it, only highest value residential properties will pay more.
  • Unemployment forecast to fall to 5.4% next year before settling at 5.3%
  • An extra £2bn every year for the NHS and £1.2bn investment in GP services.
  • Hospices are to be refunded VAT payments.
  • Fuel Duty to remain frozen.
  • Age passenger duty for children under 12 will be abolished next may and under 16’s in 2016.
  • Business rates will be cut and capped with extra help for the High Street.
  • Government backed student loans of up to £10,000 will be available to all those undertaking  postgraduate masters degrees.
  • The ‘Funding For Lending’ scheme has been extended by a further year focusing exclusively on smaller firms.
  • Total welfare spending will be £1bn a year lower than forecast.
  • 55% ‘Death Tax’ on pensions will be abolished and inherited ISAs will be kept tax free.