HMRC has started on a journey to become “one of the most digitally advanced tax administrations in the world” with the official launch of the first batch of online personal tax accounts (PTA). Similar to ‘online banking’ PTAs allow taxpayers to manage their tax affairs online, giving them a ‘clear and joined-up view’ of the tax they pay. Just as online banking accounts made monthly statements redundant, PTAs will bring yearly tax returns to an end. The new service is being phased in, and by mid-December 2015 more than a million self-assessment taxpayers are expected to have access to digital accounts.
PTAs will combine information from banks, employers, building societies and other government departments so that taxpayers don’t have to find all information and feed it themselves.
Similar to the concept of real-time information (RTI) in payroll, PTAs will provide information in real-time, telling you what you need to pay and what you are owed. And if something doesn’t make sense, you will be able to access a virtual assistant and web chat.
A digital transformation
The launch of online PTAs is part of HMRC’s drive to digitise tax and create one central place for customers to do business with HMRC.
It was only last year that HMRC launched online business tax accounts which are already being used by 2.2 million businesses. By April 2016 all personal taxpayers will have personal accounts, and so will all of the UK’s five million small businesses. HMRC’s aim is to have all taxpayers, both individuals and corporates, work through digital tax accounts by 2020.
Director General of personal tax, Ruth Owen, said: "The launch of personal tax accounts is a groundbreaking development for HMRC and our customers. Remember when you started banking online? Well, this is the equivalent shift in service for the majority of our customers wanting to do business with us online."
A new challenge for landlords, small businesses and the self-employed?
Though a digital tax system makes things easier some things will not change. For instance, taxpayers will still have to submit information about income that HMRC does not have from other sources. This is especially true for more than 4 million self-employed workers, landlords and small businesses who make more than £10,000 a year profit as, from April 2018, they will now need to update HMRC of their tax position each quarter. More details about this will be rolled out next year when the plan goes into consultation. We think that the quarterly reporting requirement needs to be considered as it will increase HMRC’s workload and the number of inaccuracies in returns being filed will no doubt go up too.
Overall, anything that bypasses HMRC phone lines seem like a great idea to us; however, please don’t assume that the new system will be without any wrinkles in the early stages. If you’d like to find out how you can automate your tax affairs speak to an accountant.