Taxes are going digital - Here's what you should know about it.

The world is changing - more and more services are being made available online, from booking your train tickets, making a doctors appointment and doing the weekly shop, to further education, promoting your business and online banking. In fact, millions of people and companies are benefiting from the practicality and ease of services going digital.

In March 2015, the Chancellor proposed an "end of the tax return" and the transformation of the current tax system with the development of digital tax accounts. As a result, a HM Revenue & Customs' (HMRC's) digital service is being set up, which will bring all individual and business tax information into one place, making it easier for you to register, file, pay and update your tax information online, at anytime.

The foundations of the new system are Tax Simplified, Making Tax Digital For Businesses, Tax in One Place, and Making Tax Digital For Individual Taxpayers.

Tax Simplified

A centralised system where you can view and update all your information giving you a more individually tailored service. You won’t have to give HMRC information that it should be able to get elsewhere - instead they will collect some details from specific third parties (e.g. employers, banks).

Making Tax Digital for Business

Businesses will no longer have to wait until the end of the year to know their tax balance - the digital tax system will collect and processes tax more information in real-time. This will reduce tax-due and repayments owed from accruing.

Tax in One Place

A system where you can see all of your tax information in one place - including all liabilities and entitlements. By April 2016, individuals will be able to complete and have access to all of their financial data through their digital tax account.

Making Tax Digital for Individuals

Individual taxpayers will be able to check and update their accounts at anytime on any device. By April 2016, all individuals will have access their digital accounts, get support through web-chats and receive deadline reminders by secure messaging.


What does this mean for me?

The development of a single, centralised digital tax system will reduce (or even remove) tedious form filling so that you won't have to tell multiple HMRC services the information it already knows. This will help make unnecessary time delays a thing of the past because the tax system will function in real-time - showing you full and up-to-date calculations whenever you log in.

For businesses, this also means being more aware of monies owed and allowing you to plan ahead. More businesses will be moving towards digital records, and from April 2018 you will need to send your tax information to HMRC at least quarterly.

For individuals, you will have access to your HMRC records through your digital accounts, With all the relevant information needed by HMRC already updated by you, and by combining all accounting data held, you will be able to see your complete financial picture. This will also mean the "end to the annual Self Assessment tax return" for the vast majority of people. To further reduce the effort and time you’ve previously needed to put in, HMRC will aim to get some information from third parties (such as banks and employers), removing the need for you to report it. Additionally, an online billing system will let you pay any outstanding tax, which otherwise can’t be collected through PAYE, eliminating Self Assessment tax returns, and allowing you to make payments at the due time or possibly by smaller monthly payments. If you currently complete Self Assessment tax returns, you can use your digital account to check your tax is in order.

To help you keep your details up-to-date and accurate, and improve communication with the Taxman, you will have easy access to support resources such as virtual assistants and web-chat functions, as well as being able to give permission for someone else to help you with your tax details (such as your accountant). The system will also inform people of upcoming deadlines, and therefore reduce penalties and prevent accruing debt.


When is this going to happen?

It has already begun - more than two million businesses started using their digital accounts in 2015. Personal Tax Account is currently being phased in as an alternative to paper Self Assessment tax returns due at the end of October each year, and digital tax returns due by the end of January each year (you can read more about this here). It is expected that the first five million small businesses and 10 million individuals will be able to access their digital account by April 2016.

January to June 2016
  • Small businesses and individual taxpayers will be able to access to their own digital tax account, and able to view what information HMRC holds about them.
  • Web-chat introduced to support PAYE taxpayers in their digital accounts
  • You'll be able to see how your NI contributions affect your State Pension through your digital account. 
July to December 2016
  • "Trusted Helpers" will be able to help others with their digital tax accounts
  • Bank and building society interest above the personal savings allowance will be included in tax codes for employees and pensioners
January to June 2017
  • The new online billing system function comes in to effect
  • You'll be able to report additional sources of income through your digital tax account
July to December 2017
  • Automatic tax code adjustments take effect, preventing PAYE under and overpayments 
  • You digital tax accounts will show you an overview of all your tax liabilities in one place 
January to June 2018
  • Interest paid by banks and building societies will be shown in your digital tax accounts
July to December 2018
  • Businesses, self-employed and landlords will need to start updating HMRC quarterly for income tax and NI obligations
  • You'll no longer need to report Child Benefit to HMRC 
  • Businesses, self-employed and landlords will need to start updating HMRC quarterly for VAT obligations
  • You will need to pay Capital Gains Tax following the disposal of residential properties within 30 days 
  • Businesses, self-employed and landlords will need to start updating HMRC quarterly for Corporation Tax obligations
  • The full range of HMRC services are available to you through your digital tax accounts 

The proposed HMRC timeline states that the system is due to be complete by 2020. 


What do I need to do?

To log into your Personal Tax Account, you'll need to verify your identify with the GOV.UK Verify system, which will confirm that you are who you say you while reducing the possibility of anyone else impersonating you. CitizenSafe is a certified identity provider - we will be able to help you confirm your identity, which you can then use to access your Personal Tax Account and several other Government services, through the GOV.UK website.


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