The end of the tax return?

It was announced that by the end of the next Parliament, every individual and small business will be able to see and manage their tax affairs through a digital account, removing the need for annual tax returns.

Under the plans, by early 2016 all of the UK's five million small businesses and the first ten million individuals will have access to their own digital tax account. It is intended to be simple, personalised and secure, offering an increasing range of integrated services. The accounts should bring together in one place all the information that taxpayers need to understand their tax position. They will be able to register, file, pay and update their information, at any time of the year, using the digital device of their choice.

Taxpayers will get a real-time view of their tax affairs and see how their tax is calculated. They will also be able to check how much tax they owe or need to be repaid and see their options for paying securely. Digital accounts aim to give small businesses greater certainty and control over their tax position. Those which pay more than one tax (such as corporation tax, VAT and PAYE) will be able to take a single view of their total liabilities across all taxes.

HMRC will automatically use the information it holds, along with new data from third parties, to populate the digital accounts. Those who pay their tax through PAYE will have their income tax, national insurance contributions (NICs) and pension position shown in their digital accounts, including any interest from banks and building societies. Taxpayers will then be able to log-in to check and confirm that their details are complete and correct.

By 2020, businesses will be able to manage their taxes together as part of their day-to-day running, rather than something to be done separately. Their accounting software will be able to feed data straight into their digital tax account, so that some businesses will simply log-in to check their details and not need to send an annual return.

The digital account will show PAYE taxpayers how much tax they will pay via their employer. Those with complex tax affairs will be able to tell HMRC about additional income online and have it reflected in their digital tax account. Individuals and small businesses will have the option to 'pay as you go'. In addition, instead of making a number of payments across different taxes, they will be able to make just one. Taxpayers will be able to let agents manage their digital account on their behalf.

Over time, it is intended that the digital accounts will offer access to a range of other Government services. To begin with, individuals will be able to see how their NICs affect their state pension. Later in 2015, the Government will publish a road map and consult on how it will deliver the changes needed. Separate consultations will cover a new payment process to support digital accounts and reform of NICs for the self-employed.

2015 Budget: measures for savers

The Chancellor's Budget Speech focused on four key areas, which formed the foundation of proposed Government policies for the next few years.

As previously announced, up to five million pensioners are being given the opportunity to cash in their existing pension annuities. When the changes come in, savers will be allowed to take their whole pot in a single lump sum, or make withdrawals as they see fit.

The new flexible ISA will allow individuals to withdraw their savings and then make further investments up to their annual allowance, without being penalised, so long as the transaction occurs within the same tax year. From 6 April this year, the ISA allowance will be set at £15,240.

The Help to Buy: ISA, which combines an ISA with the Help to Buy scheme for first time house buyers, means that the Government will top up savings by £50 for every £200 saved. These ISAs are intended to help individuals save for a mortgage deposit. Government contributions will go up to a maximum of £3,000 per Help to Buy: ISA.

Additionally, the Personal Savings Allowance means that the first £1,000 of savings income will be free from tax for most individuals from April 2016.

The Chancellor said that these measures will create tax-free banking for almost the entire population.

The Chancellor’s Budget: what to expect

With Chancellor George Osborne preparing deliver his Budget Speech today at 12.30pm, the nation has been speculating on what announcements he might make.

In advance of the Speech, there have already been a number of announcements about possible future changes, which are expected to be confirmed today.

Possible changes to the inheritance tax threshold and cash for pension annuities have been reported this week. The lifetime allowance on tax-free pension savings will reportedly be reduced from £1.25 million to £1 million, with the additional income to the Treasury being used to raise the tax free income tax allowance to even higher than already planned.

The Government has previously committed itself to a review of business rates, with corporation tax set to fall to 20%, and a number of measures likely to be put in place to aid the North Sea oil industry.

In the latest announcement, the national minimum wage (NMW) is set to increase by 20p per hour from October 2015. The rate for those aged 21 and over will be £6.70, while the rate for apprentices will be increased by 57p to £3.30 per hour.

Be sure to check our website after the Budget Speech for further updates on the major announcements.