The End of the Annual Tax Return – what will this mean for you?
Did anyone spot the plans to phase out the Annual Tax Return in George Osbourne’s recent Autumn Statement? They were tucked away nicely but luckily, our eagle eyed team spotted them and we can fill you in!
The aim is to replace the current Annual Tax Return with quarterly returns by 2020. It is claimed that this will make life easier for tax payers, many of whom are understandably concerned that the changes will mean more paperwork and – even worse – that it will be more costly for many small business owners.
If you earn over £10,000 in profit a year - that’s around 4 million of us – then you will be affected by these changes. So what can you expect?
Most notably, by 2020 you will be required to submit quarterly updates to HMRC of your tax situation.
The first step will see HM Revenue & Customs introducing Personal Tax Accounts for up to one million self-employed workers – these will be similar to an internet bank account and will allow HMRC to see what tax is due at any time of the year. These Personal Tax Accounts will consolidate information from employers, banks, building societies and other government departments so that taxpayers won’t have to hunt for all of the information and add it themselves. The Accounts will update in real time so the user can see at any time what they are owed and what they need to pay.
The new proposals have received mixed reviews. Some tax payers may find that a quarterly return makes it easier to keep track of how much tax they owe, and they will find it simpler to plan their tax payments over the year, which in turn will improve their cash flow.
For many however - particularly those who are not always on top of their paperwork! – the proposed changes could mean having to pay an accountant to calculate their tax four times a year instead of just once, which could prove rather costly.
Furthermore, there are fears that some people could be caught out by more late payment fees – the current penalty is £100 for being just one day late with your return.
A HMRC spokesman said: “Many taxpayers have told us they would like more certainty over their tax bill and we acknowledge that they shouldn’t have to wait until after the end of the year before being landed with an unexpected tax bill. That’s why we’re making it easier for them to update their tax information more regularly from 2018. We will ensure people have access to guidance and support where needed, including access to telephone filing.”
Will these changes make things easier or more complex for small businesses? Time will tell. DMF Accountancy will keep you updated on developments as soon as we hear of them.
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