Sponsored content: New digital tax accounts designed to keep track of your total annual tax liability
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The days of filing an annual tax return could be numbered as the Government forges ahead with plans for new digital tax accounts.
Announced in the spring budget, the revenue hope the new accounts will collate information from various sources and allow tax payers to keep an eye on their liability.
Further details have now been released, and Keith Senior, of Jacobs Allen Chartered Accountants and Chartered Tax Advisors, has been looking into the effect they may have on clients.
Mr Senior, based in Bury St Edmunds, said: “Starting in April 2016, the Revenue will be setting up thousands of personal accounts. Individuals will be able to go online and see what income they have from which source and how much tax they owe.
“Where individuals have interest income from banks it will take details of that, it will gather information from public companies about dividend payments and also collate information about income from any rental properties where the rental agent provides such data to the Revenue direct. It will stop the individual having to reinput all of that data into a tax return each year.
“The idea is that the system will be fully operational by 2020.”
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However, Mr Senior already has concerns about how the system will work.
“We are reliant on the Revenue getting the right information, and a lot of us are very sceptical about their capacity to do that.
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“Also, the whole system relies on individuals and businesses actually having access to the digital accounts.”
The new accounts will be accessible only by each individual and the taxpayer’s accountant won’t immediately be able to access them. There are plans to change this to allow such access, but in the meantime it means small businesses could have to take a greater role in their accounts, which Mr Senior predicts could be a challenge for many.
He added: “Individuals will also be required to collate and input information that is not automatically on the digital account four times a year, which could become more of a burden than completing their annual tax return. It could also lead to higher accountancy costs for small businesses, who rely on their accountant to do that.”
The Government has yet to clarify exactly who will have an account from the start, but early indications suggest the only tax payers who will be exempt are those who pay tax via the PAYE system and have a secondary income of less than £10,000.
“One of the benefits is that tax payers will be able to see an up-to-date summary of their total income, and the total of all taxes owed, including income tax, national insurance PAYE and VAT. The likelihood is that the change will encourage businesses to use bookkeeping software to easily upload quarterly data, but if you are keeping such proper records, you should know details of PAYE and VAT anyway.”
For more information on how the changes could affect you, or support with your annual accounts, contact Jacobs Allen.