In the past, there have been headlines in the press announcing that self-assessment tax returns are going to be abolished. As is often the case the reality is rather different from the glaring headlines. However, HM Revenue and Customs (HMRC) is joining in the digital revolution and its vision is that personal taxpayers and businesses will be able to register, file and update their information at any time day or night and at any point in the tax year, by accessing a new ‘digital tax account’.
HMRC have described the digital tax account as operating rather like online banking. Instead of submitting an annual tax return many months after the income is received, a taxpayer’s digital tax account will be pre-populated with information provided directly to HMRC by employers, banks and building societies etc. Individuals will still have an obligation to inform HMRC of their income and gains where HMRC can’t obtain the details itself from other sources. Under the new regime, the reporting obligations for self-employed taxpayers and some landlords will increase to include updating HMRC (in a digital format) with details of their taxable profits every quarter; this is the much publicised ‘quarterly reporting’. As now, we can help with HMRC reporting but for some clients this may mean that their financial records must significantly improve whilst others will no longer be able to put off dealing with their tax affairs until the tax return filing deadline is looming.
For those clients with simple tax affairs, a self-assessment tax return may not ultimately be required. However, our help is likely to be needed to ensure that HMRC has all the relevant information, that the information it holds is accurate and that the tax calculation is correct (dealing with all tax reliefs and claims correctly). For clients with more complex tax affairs, including those with foreign income or gains, the completion of an annual tax return will still be required. From April 2019, individuals and businesses who are registered for VAT and has a business turnover in excess of £85,000 must submit their quarterly VAT returns digitally. Various bookkeeping packages are available for keeping records and submitting VAT returns digitally and bridging software may be used to transfer spreadsheet records onto permitted software.
Brexit has delayed the digital revolution for personal tax clients and those businesses under the £85,000 threshold. It is still HMRC’s intention for those who are self-employed and/or receiving rental income to update HMRC quarterly, but this is now expected to happen after 2020. This provides time to start preparing our own tax compliance processes and ensure that the transition to the new regime is as smooth as possible. We will also help our clients understand what the new regime will mean for them (including helping to make any changes that may be required to their financial record keeping). Much of the detail on how the new regime will work has yet to be finalised, but HMRC is already testing the software that has been developed. In the meantime, taxpayers are already able to access their digital tax accounts and we can provide guidance on how to access and subsequently sign in to your own Personal Tax Account. 2020 will be upon us before we know it and so it is worth getting to grips with your Personal Tax Account and ensuring your financial record keeping is up to scratch now.
If you would like to speak to a senior tax manager about this, or any other matter, please give us a call today on 01275 370670. We would love to hear from you.
This article is for educational purposes and should not be considered as advice. Every care has been taken to ensure that this information is correct and in accordance with our understanding of the law and HM Revenue & Customs practice, which may change in the future. This article contains the opinions of the author but not necessarily the Firm. Tax planning is not regulated by the Financial Conduct Authority.
RMT Ref: 234/12.18/LH