I’m looking forward to meeting members of the National Youth Choirs of Great Britain fellowship scheme. I’ll be speaking to them about some of the tax issues and opportunities facing self-employed musicians at the start of their careers. An interesting and challenging time, as the UK tax rules and system are changing particularly fast at present.
Plans have been announced to bring all taxpayers into a new digital system between 2016 and 2020.
The promise is that ‘digital accounts’ will be simple, secure, personalised to the taxpayer, and accessible through the digital device of their choice. Some information needed by HMRC will enter the digital accounts automatically (eg from PAYE records). There are indications that there may be exceptions for taxpayers for whom it would be difficult, or expensive, to use the new system, but not yet what these exceptions are.
There is a move to take many taxpayers out of Self Assessment, with no need to submit any form of return. I would welcome a simplification, however I think this would be unlikely to apply to many of my clients.
There is also a promise to make systems available to tax advisers (‘agents’) whom taxpayers wish to use. As yet, these are not available.
My intention is to continue to offer an equivalent service to my clients once they undergo the compulsory move into the new system, that is, to prepare their tax returns and assist them in submitting correct information to HMRC, let them know the correct tax to pay, deal with HMRC on their behalf where they wish, and help them keep their tax up to date and plan in ways that are tax efficient. How, whether, and at what price, I can do this does depend on what online systems are in place to allow this. All contracts with clients will need to be reissued at this time depending on what is needed, and what I can offer.
Last year’s announcement that the self-employed would be asked for four submissions of information per year has been debated in Parliament and I hope there will be more detail on this soon. If and when this is brought in, this would clearly have an impact on my work patterns and volume of work. I am therefore keeping my client list but not taking on extra clients for the time being.
I am keeping as up to date as possible with developments. I have spoken to my tax-return software supplier (who wish to continue to supply software for return preparation, but do not yet know what will be required). I attended a recent update by HMRC on how tax advisers will fit into the new regime. I am considering an approach to HMRC highlighting the need for a smooth transition with full access for chosen tax advisers.
Parliament debated the petition ‘Scrap plans forcing self employed & small business to do 4 tax returns yearly’ on Monday.
See the ‘Digital by 2020’ page at the top for developments to this and other aspects of digitalisation.
You may have read that during the Autumn Statement a plan was announced to require all self-employed taxpayers to make four income tax returns per year by 2020.
My immediate reaction was that this, in the very scant detail it was mentioned, would not be positive. I welcome genuine tax simplification, whether to rules or processes, but I couldn’t immediately see how this would simplify anything. And this is such a big change that I would have preferred a public consultation period before any decision.
Having signed a petition to ask for reconsideration of this this move to be debated in Parliament, I have received today a message that it is scheduled for debate on 25 January.
The January date does not make it a convenient time for anyone working in personal tax to stay up to the minute with developments! There may be some press reports during the days following. But I shall post again with a summary during February. Depending on what unfolds, I shall also consider writing to the Government, outlining the potential impact on current clients and my own personal tax work.
More details are gradually becoming available as to how HMRC’s new ‘digital accounts’ will work.
It is planned that every taxpaying individual and business will have online access to their own HMRC ‘account’ showing all the tax(es) they pay and enabling them to see real-time information on their tax. Information will be accessed by HMRC from banking records, PAYE records and some other sources, such as businesses’ accounting packages. This is aimed at removing the need for an annual tax return. Other benefits will include facilities to do more online, removing some of the current need for paper forms.
This move will happen between 2016 and 2020.
The majority of my clients have self-employed businesses but do not use accounting software packages to keep their business records, instead using spreadsheets, Word documents or handwritten records. For those wishing to continue as they are, it has been indicated:
-That taxpayers will be able to authorise a tax adviser to manage their digital account on their behalf if they wish
-That those who wish to continue filing an annual return will be able to do so (and at present it seems to me this would be necessary for most of my clients, unless they wished to make a move to using accounting software)
For the time being, I plan to be offering a similar service to clients, but most likely with authorised access to the new, fuller online information which clients themselves will also be able to see.
Anyone receiving a letter from HMRC concerning the new digital service/Your Tax Account/the tax ‘dashboard’, please let me know and I’d be grateful to see a copy of this.
The ’emergency’ Budget overall looks to me to be a tax-raising budget. In particular, some currently receiving tax credits will be hit, as well as those letting out investment properties. However from April 2017, the raised tax-free personal allowance and 40% tax threshold may help some of my clients currently near or just into 40% tax.
A number of changes announced promise to be quite complex in how they operate and I shall post more having considered these. I shall be interested in particular to look at
-When is a house a home (for inheritance tax purposes)
-How to count children (for the allowances cap above two children)
-Exactly where ‘the North’ starts (I am on a train to Newcastle shortly, so shall be looking out for the Powerhouse on the way)