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Starting next year, tax returns will be replaced by personalised digital tax accounts which will be pre-populated with data HMRC already holds, including information about employment, pensions and savings. This will mean that in future many people will only need to check their tax information online.
This was welcomed by the Chartered Insitute of Taxation although they cautioned that tax may continue to be taxing for some.
Patrick Stevens, CIOT Tax Policy Director, said: “The sun may or may not be starting to shine on the UK economy but it is setting on the Self-Assessment Tax Return.
“This is good news for taxpayers provided that their data is secure and that paper tax returns remain an option for those people who prefer them. It is not clear by when HMRC will be in a position to bring in key information to populate those accounts.
"It may be that a digital tax account without this information will offer little over and above the current system. Employment income information should be readily available. Bank interest may take longer to make use of, and dividends of companies much longer still. Until this happens there will be little direct benefit for taxpayers.
“Also, it may not be the revolutionary simplification it is billed to be for all taxpayers. Those taxpayers with relatively simple tax affairs, for example employees and pensioners who pay their tax through PAYE, stand to gain most from this. But those with more challenging tax affairs, for example the self-employed and landlords, will still need to apply complex tax rules to calculate their income and will still then need to declare it to HMRC.
“Many taxpayers in this position will rely on their agents to manage their digital account on their behalf. We would caution against rolling out the new digital tax accounts to small businesses in particular until this facility is available and working satisfactorily.”
Orwellian whiff?
Jamie Morrison, from accountants HW Fisher & Company, said: “Few of Britain’s five million self-employed will mourn the passing of the annual tax return. The mad rush to dig out receipts in January is an annual torture for many.
“But the idea that the HMRC will simply automate everything is fanciful, and won’t help anyone other than those with the most straightforward tax affairs.
“And ditching the idea of self-assessment for state assessment of our tax liability has an Orwellian whiff to it.
“Rumours of the death of accountants are exaggerated too – the reality for most self-employed people is that they will continue to need expert help to get all the tax relief to which they’re entitled."
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Susie Hughes © Shout99 2015
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