Budget 2015: What will scrapping of annual tax returns mean for you?

By 2017 those with simple tax affairs will be released from the yearly drudge

Click to follow

The end of the annual tax return will prompt cheers across the land among all those who endure the annual form-filling nightmare. It’s a lot of people - around 11 million, HMRC reckons.

And while the move to online tax return completion – for those that have embraced it – has eased the process, it’s still a daunting one. That’s especially so for the millions who have to complete a tax return because of investment income, the occasional freelance work, or even simply because they claim child benefit. Frankly anyone who doesn’t run their own business is likely to struggle with financial paperwork, especially with the tax forms taking some considerable time to complete even for those with the simplest tax positions. And then there’s the added stress that if you make an honest mistake the Revenue could fine you to the hilt!

That should all disappear under the new system. By 2017 those with simple tax affairs – such as the hundreds of thousands of high income parents who have only been forced to complete tax returns because they claim child benefit – will be released from the yearly drudge.

Soon after, hopefully, the rest of us with relatively simple financial situations will be able to control our tax affairs through our phone or laptop.

And then by 2020 small businesses will be able to use the new digital tax accounts, allowing them to have much better control over the tax they owe and when to pay it.

However, the end of the annual tax return will mean the end of the annual tax bill. The Treasury says taxpayers – whether they are individuals or businesses – will “pay the right tax at the right time”, which suggests an end to the grace period when many could pay the bulk of their income tax in the year after they earned it.

A digital tax account will likely mean paying tax monthly – timely, the Treasury says – which means an end to “tax money” sitting in an account earning interest until the tax is due.

In other words the whole process, while benefiting us all, will financially benefit the Government the most with that extra interest many have been earning being transferred to the Treasury.

Does that mean it’s another stealth tax? The self-employed and businesses may have to think again about their finances if they’ve been relying on interest earned from tax money they’ve put away each month. They will see it as a stealth tax.

But workers who pay tax monthly through PAYE will say it’s about time the rest of the country was forced to pay tax on time in line with them.

Comments