HM Revenue & Customs (“HMRC”) is to introduce a new online tax return system.
In a move in 2015, George Osborne claimed that it would herald the end of “complex, costly and time-consuming” form-filling.
In his annual Budget statement 2015, the Chancellor said HMRC would aim to give 5 million small businesses and 10 million individuals access to a single online tax account tax from 2016. (initially deferred until 2024).
“We will abolish the annual tax return altogether,” Osborne told the House.
“With a digital tax account, individuals and small businesses will be in complete control of their tax affairs and have confidence that they have met their obligations,” the HMRC document states.
“They won’t need to provide information that HMRC already holds, and they’ll be able to see and understand their tax liability. For those who deal with several taxes, it will be just like dealing with one — taking the cost, time and stress out of the process.
”However, on 19th December 2022, HM Revenue & Customs announced a further delay and changes:
Understanding that self-employed individuals and landlords are currently facing a challenging economic environment, and the transition to Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) represents a significant change to taxpayers and HMRC for how self-employment and property income is reported, the Government is giving a longer period to prepare for MTD. The mandatory use of software is therefore being phased in from April 2026, rather than April 2024.
From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software.
Those with an income over £30,000 will need to do this from April 2027 and those over £20,000 from April 2028.”
Most customers will be able to join voluntarily beforehand meaning they can eliminate common errors and save time managing their tax affairs.
The Government has also announced a review into the needs of smaller businesses, and particularly those under the £20,000 income threshold. The review will consider how MTD for ITSA can be shaped to meet the needs of these smaller businesses and the best way for them to fulfil their Income Tax obligations. It will also inform the approach for any further rollout of MTD for ITSA after April 2027.
There is an opportunity to develop software to help these new entrants to the market simplify their tax filing obligations.
