There have been some press reports this morning predicting changes to tax returns in the budget to be held later.
It’s an interesting idea, and I look forward to finding out more when the actual budget takes place.
For those who have very simple tax affairs, perhaps a higher rate employment and some investment income, this will remove the burden of having to complete an annual tax return.
There are a few points to watch out for though:
1) The proposed plan for HMRC to collect all the employment/pension and investment income for people isn’t actually new – many years ago you could write to HMRC and ask them to complete your return with the employment/pension and interest details that they already had on their system. Linking to consolidated tax vouchers for investments if this happens will be new though. Overseas untaxed income would most likely have to be manually input unless reported by the foreign country direct to HMRC.
2) Not everyone is online – it’s assumed that everyone has internet access, however there are still quite a few people who do not have access.
3) As we have seen with self-assessment, there is the potential to make costly mistakes if you are not familiar with the current tax rules or misread them.
4) For the self-employed (and those with rental properties), annual accounts are not just something you do for the taxman – they should be used for business planning to help your business grow. This is also a reason why simplified expenses, although helpful in many cases, can create accounts that don’t entirely reflect the actual position in the year and could lead to incorrect decisions being made.
I’ll be watching the budget with interest later today, and look forward to hearing any proposed changes.