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An end to the annual tax return by 2020

March 29, 2016 featured image

For many the annual tax return is the low point of the year. It’s a stressful time spent scrambling around for receipts and various bits of paper work in an effort not to get fined and then actually remembering to get it posted in time, it’s probably the worst thing about being self-employed.

Independent tradespeople have been clamouring for a simpler tax system for years and it seems that HMRC are finally listening.

HMRC have said that they are committed to transforming the tax system to create something that is more effective, more efficient and easier for the taxpayers.

The majority of Britain’s 5.4 million businesses already manage their tax online using HMRC’s clunky interface. In fact more than 99% of VAT returns are submitted online.

According to HMRC they will abolish the dreaded annual tax return by the year 2020, replacing it with a much simpler online system.

The digital tax accounts integrate the information businesses must provide into a simple, seamless process, from entering it in a business record-keeping app, through to sending it to HMRC.

This means that instead of one big, onerous tax return each year, businesses can check that the information they are recording is correct and simply click “send” to update HMRC once a quarter.

Many taxpayers want more certainty over their tax bill and access to an in-year picture of their tax position. Too many viable new companies go under when they receive their tax bill simply because they did not know how much to set aside and not everyone can afford an accountant. Digital tax accounts will help fix this issue.

For small businesses that are not already keeping digital records, there will be a range of software packages and apps available, including free options for those with simple, straightforward tax affairs. There will also be clear advice on how to use the digital tax accounts.

These reforms are going to be introduced “bit by bit” to allow firms to adjust and get used to changing the way they do their tax returns. In fact there won’t be any moves onto the new system before 2018. This should give HMRC enough time to get it right.

For those who cannot use digital technologies for whatever reason (perhaps lacking internet connectivity or do not own a computer or smart phone) there will be alternatives offered such as nominating a different person to update their information or giving information by phone.

The end of the annual tax return is nigh, we may be about to have the best tax administration system in the world after many years of sorrow.

For more information click here

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