If you’re self-employed, a contractor or a higher rate taxpayer, you’ll know how time consuming and tedious filling in your self-assessment tax return can be each year. It should be music to your ears then that this process is set to change, with a new system of personal tax accounts to be launched by HM Revenue & Customs next year. To make sure you’re in the know about what these changes could mean for you, we’re going to take you through the basics.
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The launch of the new personal tax accounts will mean that taxpayers that complete a self-assessment tax return will be able to manage their tax online. The system of online accounts will be very similar to online banking, in the sense that people will be able to see their tax details and make payments online. If you’re an employee and don’t fill in a tax return – your employer works out your tax for you and takes it off your pay – you won’t be affected by these changes for now.
The HMRC say that more than one million taxpayers completing their self-assessment should have been directed to their online personal tax account already, as they move towards a completely digital tax service. Two million businesses are already using their digital accounts and all of the UK’s five million small businesses will have access to their own accounts by April 2016. All individual taxpayers will have access at this point as well, meaning the end of the annual self-assessment tax return for many.
By 2020, all businesses and individual taxpayers will be able to change their information at any time of the day and year through this system, meaning that they’ll be able to register, file, pay and update their information completely online.
The motivation behind this move is that the HMRC wants to bring all of the information that it has on taxpayers into one system. This means data from employers, banks, building societies and other government departments.
Switching to handling tax payments digitally should in theory help to stop the build-up of overdue tax or refunds owed towards the end of each financial year.
What this means for you
This move should make it easier to access the details of your earnings and tax whenever you need it – in the same way that you can log into your bank account online. It should also make it easier to contact HMRC as there will be services like webchats and a virtual assistant to help you with any queries you may have.
With that said, it might be slightly more work for you as from 2018 self-employed people and landlords will have to update their information every quarter, if they’re updating their primary source of income. For those adding information on their secondary income, this will only have to be updated if the sum is worth more than £10,000 and the main income earned is from employment or a pension.