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Cloud Accounting Individuals

Making Tax Digital for Individuals

In March 2015 George Osbourne announced plans to revolutionise the tax system and bring about ‘the end of the Tax Return’ with the aim of making the tax system more efficient and easier for taxpayers. Individuals who pay tax either pay through Self-Assessment or PAYE. Self-Assessment has been online for many years and has the ability for tax payers to access their own accounts and look at things such as their forthcoming tax payments or check if their tax return has been filed. However, for individuals who pay tax and National Insurance through PAYE, no digital system existed until now.

Personal Tax Account

Now with the Personal Tax Account (PTA) an individual is able to not only look at current and past years of tax payments, NI contributions and P60’s but also can view pension forecasts, benefits the individual may receive such as Child Benefit or Tax Credits, updates on new tax codes, track the progress of any forms that have been submitted to HMRC as well as many other services.

The benefits of this new system should be huge for the taxpayer, gone will be the days when paper filing was needed or waiting on the phone to ask a simple question to HMRC. HMRC should now hold all personal tax information in one place that is easily accessible for the taxpayer to view. You are able to join the 8 million others who have already set up your PTA’s now by following this link https://www.gov.uk/personal-tax-account. Those long arduous calls on hold to HMRC for hours may also be a thing of the past as you’ll be able to communicate with tax officials via virtual assistants and web-chat functions. Time delays should be minimised as tax becomes real time, therefore removing the risk of missing deadlines and building up unnecessary penalties. This is the theory anyway!

The system is being constantly updated and improved and will not be fully functional by 2020, by which time HMRC intend that tax will be a pay-as-you-go system in which tax is paid quarterly avoiding those big annual tax payments.

Unfortunately, whilst the PTA’s show a positive step forward in the digital world HMRC will not be able to pre-populate everything, for example dividend income will still need to be notified to HMRC.

Timeline

The timeline for digital tax accounts is already underway:

  • April 2016 – PTA’s became available with the PAYE income, pension forecasts, NI contributions and web chat facilities being one of the first things to be added into the accounts.
  • June 2017 – A billing function was added, this makes it possible to pay tax direct to HMRC.
  • September 2017 – Simple Assessments have been introduced. See below for further details.
  • By the end of 2017 – Automatic tax code adjustments will take place which should reduce PAYE under or over payments and all tax liabilities will be shown in one place.
  • By mid-2018 – HMRC will begin to show interest figures that have been received from banks and building societies in the Personal Tax Account overview.
  • From April 2019 – VAT registered sole traders and partnerships with turnover in excess of the VAT threshold will be required to submit quarterly reports
  • From no sooner than April 2020 it is proposed that any other businesses including landlords (who for this purpose are to be treated as businesses) with turnover greater than £10,000 will be required to submit quarterly reports.

Simple Assessment

Simple Assessment, for some taxpayers, will replace the need to submit an annual Self-Assessment Tax Return. It works by instead of HMRC requesting vast amounts of information to calculate tax owed, HMRC will now use data it already holds and calculate what is due. HMRC have begun to issue either P800 forms (PAYE tax calculation) or Simple Assessment letters (PA302). A Simple Assessment will affect those taxpayers who either have a state pension in excess of the personal allowance or PAYE taxpayers who have underpaid tax and are unable to have this tax collected through their tax code.

If issued with a P800 or Simple Assessment letter taxpayers will have 60 days to notify HMRC of any queries before the return will become compulsory.

State pensioners should note, if their state pension exceeds the personal allowance but they have already received a notice to file a Self Assessment Tax Return for the tax year 2016-17 they should complete this as usual. This change to the Simple Assessment will come into affect for 2017-18.

Any help from HMRC?

HMRC do have an app that is accessible with iOS and Android devices which you can use to track forms sent to HMRC, look at your digital tax account and access the tax calculator to find out what you can expect to take home per week/month/year through PAYE.

HMRC have run various webinars in order to show taxpayers how to set up their tax accounts and use basic functions of the system. You can watch these webinars here – https://www.gov.uk/government/news/webinars-about-the-hmrc-personal-tax-account?utm_source=HMRCPTApage&utm_medium=GOVUK&utm_campaign=PTA

How can we help?

These measures are likely to mean big changes to the way our clients interact with us and HMRC. Many clients will no longer have mandatory filing of Self-Assessment Tax Returns and the deadlines that come with Self-Assessment. However, we are able to assist in all compliance work including checking pre-populated data and advising on tax liabilities and possible tax relief claims. Further, by reviewing your current Tax position with you we are well placed to be able to advise on tax planning opportunities.