HMRC are introducing a new system of personal tax accounts with the aim of removing the need for an annual tax return.
The bad news is that it will mean reporting to HMRC online every 3 months with your income and expenditure. In effect preparing 4 sets of accounts as opposed to one.
Businesses including the self-employed and landlords will, from April 2018, have to update HMRC every quarter where this activity is their main source of income.
The new accounts will allow people to see their tax details and make payments at any time of the day or year.
All personal taxpayers will have personal accounts by April this year, as will all of the country’s five million small businesses. Two million businesses are already using the new system.
The government says one advantage of the new digital tax accounts is that they should stop the build up of tax due, or refunds owed, at the end of each financial year, with no more surprises or shocks for tax payers.
The only way a business will be able to provide the information is by asking their accountant to summarise the records quarterly, or move to cloud accounting where clients enter their accounting records on to an online system that can be accessed by them and their accountant at any time
Realistically, it seems there is some substance behind the announcement and we must all prepare ourselves for the new way of doing things. Many forward-thinking accountants (Haywards included) already use cloud accounting software and it is likely that HMRC – and clients – will have little sympathy for a practice that fails to embrace new technology.
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