Tax chatbots and blockchain: is this the future of tax returns?

Have you been grappling with your tax return ahead of the 2017-18 deadline? You might be pleased to know that a wealth of technology on the horizon could be about to make the whole process much easier.

We've recently written about one in six people overpaying HMRC due to tax return errors - some of which stem from a misunderstanding of the system and language used throughout the process. Could technological innovation fix this?

In its 'Technology Review', the Office of Tax Simplification (OTS) - tasked with simplifying the UK tax system - outlined what the tax system might look like in the future, while also addressing the questions:

• do people need more informed and in control of their tax situation?
• does the whole system need to be simplified?
• do taxpayers' interactions with the system need to be simplified; they don't need to know the mechanics going on behind the scenes?

We've outlined some of the developments that could be coming our way.

Find answers with tax bots

Research conducted by HMRC in 2017 found that the 16-24 age group were most likely to contact HMRC via off-line means, despite being one of the most digitally-savvy demographics - suggesting the digital service offered by HMRC wasn't hitting the mark with younger people.

While HMRC has already launched a pilot chatbot - Ask Ruth, a cartoon who inf that she can only answer simple questions and provide website links - developments in the private sector could pave the way for this kind of service to be vastly improved.

For instance, one company is working on a tax bot that can find answers to complex questions by speedily searching through entire volumes of tax law.

Elsewhere, systems are being developed to quickly calculate complex tax figures - such as one's eligibility for capital allowances - at the click of a button. Ordinarily, this kind of calculation could take hours to figure out.

• Find out more:self-employed capital allowances

Streamlining the system with blockchain

While you may associate the term 'blockchain' with the sometimes murky, always complicated world of bitcoin, it could be a great way to streamline the tax system.

Blockchain describes the technology that allows information to be electronically transferred without being held by a third party. In theory, each 'block' would hold information regarding your tax status.

Details can be communicated between you and the tax office, and once it's all finished, the record would then be securely added to a 'chain'.

This chain would contain other blocks - each with information from previous tax years, or even your medical records if more than one institution adopts the technology.

Information in the blocks cannot be altered, and can only be accessed by verified personnel with a security key to prevent fraud and identity theft.

The safety of using this kind of technology on such a scale is totally untested, but it does present some interesting options.

Find out more:what is Bitcoin?

Personal tax accounts for all

Much of the focus on technology has been around making tax simpler for people to use - but there is some concern it could lead people to interact less with the tax system, and weaken their understanding of it.

One possible solution is to give each person their own personal tax account when they turn 16, the same time they receive their National Insurance number.

The OTS explains several potential benefits to this, the main one being to encourage a sense of ownership over one's tax obligations.

Having a tax account would allow you to see what you've earned and what tax you need to pay. The OTS even suggests that by linking your tax account with your employment history, the system could provide specific advice and guidance most relevant to you.

This would hopefully improve education and understanding about the tax system, and therefore reduce mistakes when people come to file their tax returns.

• Find out more:who should submit a tax return

Get help to submit your tax return

As for technological innovation that's already available, theWhich? tax calculator is an online self-assessment tool that can calculate your tax return and submit it directly to HMRC for a small fee, making the process much easier.

If you pay tax by self-assessment and haven't yet submitted your tax return for the 2017/18 tax year, there's not much time left.

You have until midnight on 31 January to send your return to HMRC - failing to file your return on time could mean you'll face a late penalty.

• Find out more:late tax returns and penalties for mistakes