Industry News - 9th February 2016
By 2020, all taxpayers will need an online account for the digital tax system.
In November 2015, the government announced that most businesses, self-employed people and landlords, will be required to keep HMRC updated on at least a quarterly basis, with the introduction of its new digital tax system.
These proposals, announced by the Chancellor as part of his Autumn Statement, target the self-employed, most business owners and landlords who make more than £10,000 a year profit.
This news was received with strong opposition from taxpayers, with over 110,000 people signing an online petition calling on government to ‘scrap plans forcing self employed and small business to do 4 tax returns yearly’. When a petition gathers 100,000 signatures, Parliament must debate it. Subsequently this debate took place on 25 January 2016 and in its response, the government concluded that these changes “will not mean four tax returns a year”.
Quarterly reports through software to the digital tax system
The government reiterated that although HMRC will expect taxpayers to update them on at least a quarterly basis following the introduction of these proposals, this would be done via their online account on the digital tax system and would not take the form of a full tax return. These quarterly updates will be sent to HMRC through accounting software or apps, from existing data records on the tax system.
The government claims that the new digital tax system will offer taxpayers a more up to date picture of their tax position throughout the year and help them to manage their finances more effectively, rather than waiting a year or more to know how much tax to pay.
It is estimated that around four million people will be affected by these changes, however they will not apply to individuals in employment or pensioners, unless they have secondary incomes of more than £10,000 per year from self-employment or property.
These measures form part of HMRC’s plan to create a fully digital tax system by 2020 for taxpayers and businesses in the UK. Consultation on these proposals will take place this year, so we’ll keep you updated on this as it progresses.
For detailed information on the proposals, check out the government’s ‘Making tax digital’ report.
For more information or to discuss your tax accounting consultancy needs, call us on 01299 488860 now.