Digital Tax Accounts: What You Need to KnowBack
The 2015 Budget saw the Chancellor outline plans to revolutionise the way we pay tax in the UK. These plans include Digital Tax Accounts – an online tax management platform that will see every individual and small business have access to their own online tax account by April 2016. The existing system has been criticised for being expensive and unnecessarily complex, so Digital Tax Accounts have been designed with simplicity and efficiency in mind.
This new approach spells the beginning of the end for the self-assessment tax return as HMRC seeks to make the entire taxation process more fluid and less daunting. The Government is hoping Digital Tax Accounts will give taxpayers a real-time and complete picture of their tax position. This should be fully operational by 2020.
One of the key features will be the use of existing information meaning the taxpayer won’t have to provide information HMRC has already got. Initially, this will see basic PAYE details being pre-populated and over the next few years, more information automatically gathered from other government agencies and third parties. Bank and building society interest information is scheduled to be automatically sent to HMRC by 2018. It is also thought that other sources of income such as online trading and rental income will eventually be passed on automatically.
One of the most appealing aspects of Digital Tax Accounts is its potential to prevent a build-up of unpaid or overpaid tax. As the system will be using real-time information HMRC says that they will start to make automatic tax code adjustments based on the information from 2017. Certainly, in the case of underpayments, this will eliminate those nasty surprises for taxpayers at the end of the year.
While these changes appear wonderful in theory, the new system has inevitably drawn criticism. Given HMRC’s reputation for poor customer service, concerns have been raised that taxpayers will be left high and dry when in need of help and clarity. These concerns will be particularly relevant to the less tech-savvy taxpayer. Although assurances have been made, questions will remain as to whether the online support facilities on offer will be sufficient.
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