The Chancellor has confirmed that tax returns are to be abolished and replaced by a single digital account that brings together automatically an individual or firm’s tax affairs from employers, banks and investment firms.
The government says 12 million people and small businesses will benefit from the change. Those with complex affairs will update their details online.
The new system is due to start being rolled out in 2016.
Osborne said: “We will abolish the annual tax return altogether. Millions of individuals will have the information the Revenue needs automatically uploaded into new digital tax accounts. A minority with the most complex tax affairs will be able to manage their account on-line. Businesses will feel like they are paying a simple, single business tax – and again, for most, the information needed will be automatically received. A revolutionary simplification of tax collection. Starting next year. Because we believe people should be working for themselves, not working for the tax man. Tax really doesn’t have to be taxing, and this spells the death of the annual tax return.”
Aegon regulatory strategy manager Kate Smith says: “This is a further signal that digital is the way forward across all customer’s finances. Online services have revolutionised the way we manage our pensions and bank accounts and the Revenue is moving into the digital age.
“A new digital tax account allows people instant up-to-date access to their tax affairs and will allow them to sort out their tax quickly as it cuts out paper. It should also avoid nasty tax demand surprises in the future, as by going online people will know instantly what they owe the revenue or what it owes them. We hope it will encourage more people to claim back higher rate tax relief on their pension contributions. Only basic rate tax is added automatically to people’s pension savings, with any additional tax relief claimed back, currently via a self-assessment tax return at the end of the tax year”
Prydis director James Priday says: “The chancellor has announced that the Annual Self-Assessment Tax Return is to be abolished and replaced with “real-time” online accounts by 2020. The use of the term “real-time” suggests a similar replacement to that of the annual submission of payroll information, which is now submitted by employers on a monthly basis. Taxpayers will set up a digital tax account into which they can submit tax information on a regular basis, linking into their accounting software and bank accounts. This suggests tax on salary and bank interest will automatically be uploaded, anddetails of any other income will be uploaded by the individuals so that any tax due can be calculated throughout the year. It has been described as “a revolutionary simplification of tax collection” but we have yet to see how much will be required from the taxpayer, who currently only needs to collate their information and make one submission each year. The question is: how much simpler and quicker will the new system be?”