Digitisation of tax returns – what it actually means

With continuing expansion of digitisation by HM Revenue and Customs (HMRC), the way tax is collected is already changing for many, but the near future will see even greater upheavals.

Everyone from the self-employed and small companies right through to low-income individuals and the retired will find that their relationship with the Treasury will soon look very different indeed.

Digital tax account

HMRC will give most taxpayers a digital tax account that will be managed online via free apps and software.

However, the responsibility of keeping the account up to date will fall to the individual and the self-employed, and landlords will have to file accounts four times a year, as opposed to the traditional annual tax return.

Employees on PAYE and pensioners will not be included unless there is another source of income paying over £10,000 a year.

No more self-assessment

Automatic tax bills from HMRC will be sent on the basis of the information already held, essentially replacing self-assessment with HMRC assessment.

These automatic tax bills, for those taxpayers HMRC believes have "simple" tax affairs, can be checked and challenged, although there will be a time limit before they then become final.

Travel changes

In other news for small businesses and the self employed, contractors will now be prevented from getting tax relief on the costs of their travel to work, or claiming back the cost of meals or accommodation related to that travel as expenses.

This will not affect personal service company (PSC) contractors unless the contract is covered by IR35.