In his Budget speech today, the Chancellor said that self-assessment tax returns would be replaced by new digital tax accounts by 2020.
Digital tax accounts by 2020
The government intends to introduce the new digital system from 2016 onwards, with small businesses using it to access tax data. By the end of the next Parliament in 2020, it is envisaged that ‘every individual and small business will be able to see and manage their tax affairs through their digital account, removing the need for annual tax returns’.
The benefit of the new system is that taxpayers won’t have to provide information that HMRC already holds. The digital account can also be used to check National insurance contributions and see how these relate to the state pension entitlement.
An online tax system will encourage individuals and small businesses to adopt a ‘pay as you go’ approach to tax, rather than delaying payment.
Manage tax online
Explaining the reason for the change, George Osborne said: ‘Twelve million people and small businesses are forced to complete a self-assessment tax return every year. It is complex, costly and time-consuming.
‘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’.
Consultation process begins
The government will begin a consultation process over the summer on new payment processes to enable tax and National Insurance contributions to be collected digitally.