Making Tax Digital – Digital Tax Accounts
In 2015 the government announced major plans to modernise the tax administration system by introducing digital services for tax. There are three main strands to these proposals, as follows:
- Personalised digital tax accounts for individuals and for businesses
- Quarterly digital reporting of income and expenditure by businesses, self-employed people and landlords
- Options for paying tax
Consultations have now been published by HMRC which provide further details of these proposals and so we have set out below what we currently know about the changes.
Digital tax accounts
Digital tax accounts for individuals have already been created by HMRC. These are called Personal Tax Accounts. These accounts have been linked to HMRC internal systems so that they will be pre-populated with income and tax details that HMRC already hold. This includes:
- Employment income,
- State retirement pension.
From April 2018, it is intended that interest paid by banks and building societies will be included in digital tax accounts. In order for this to happen, banks and building societies will be required to provide information to HMRC earlier, and more frequently, than currently. Taxpayers will also be able to report any additional sources of income through their digital tax accounts in 2018.
HMRC expect that with pre-populated information and taxpayers able to add in other sources of income, the digital tax account will mean that a significant number of taxpayers, with relatively straightforward tax affairs, will not need to complete a tax return.
Digital tax accounts are also being established for businesses and these will show:
- An overview of the income tax or corporation tax,
- NIC details of the business
In order to show details of the income subject to income tax or corporation tax, details of the business’s income and expenses will be provided by new quarterly tax updates.