The Law Shop is now closed. Please click here to find out more.

The End of Annual Tax Returns: What does it mean for freelancers?

James Watkins - Law on the Web

  1. 20 April 2015
  2. Employment
  3. 0 comments
Online taxes

In his most recent (and possibly final) budget last month, chancellor George Osborne announced that the annual paper tax return was to go the way of the paper driving licence, the car tax disc and the UMD in becoming extinct and obsolete.

A new digital payment system, which will be available to millions of taxpayers and companies, is set to be completed by 2020, with the earliest adopters scheduled to have access from early 2016. But how will the new system work?

 “Real-time” tax accounts

For freelancers and other self-assessment taxpayers, January 31st is a day associated with memories of frantic last-minute tax calculations. This is the day that annual tax returns are due, and unless you are one of the organised few who get their tax affairs sorted out weeks in advance, you probably dread this time of year.

However, under the new plans, this day will hold no greater significance for freelancers than it would for any other taxpayer. Those who register for self-assessment will pay their tax online through a “digital tax account”. This account will allow taxpayers to submit information and make payments on a more regular basis throughout the year, meaning that they can pay their tax in instalments, rather than in one lump sum at the end of the year.

Being able to submit tax information more regularly will make it possible for tax bills to be more in line with the taxpayer’s actual income, so they will be less reliant on trying to predict their performance for the tax year.

 Going digital

Self-assessment tax is the latest government service to go online, following in the footsteps of the aforementioned driving licence and vehicle tax services. George Osborne promised in his announcement last month that the new system would be “a revolutionary simplification of tax collection”.

If the system delivers the features that have been promised (which, given the history of government IT projects, is no foregone conclusion) it certainly has the potential to save taxpayers time and worry.

Paying taxes online will make them easier to manage for taxpayers; they will be able to do so from any computer, smartphone, or tablet (provided that it is connected to the internet, obviously). The system will allow taxpayers to pay their taxes regularly by direct debit.

The online digital tax account will also give taxpayers more information on their tax, showing tax calculations and information received from other institutions, such as pension providers and banks.

For taxpayers and businesses that use their own accounting software, they will be able link this software up with the system and feed information in directly.

However, it’s not all bad news for those who prefer the old ways – taxpayers will still be able to fill out an annual paper return if they want to do so.

Before the tax changes

Unfortunately, with the new system not set to be fully implemented until 2020, it may be a while until you can leave the burden of the annual tax return behind.

If you are self-employed and need more information about what taxes you need to pay, our Taxes for Self-Employed section can show you what you need to know. Our section on Business Tax could also help you.

Share your experiences

Please note: The views expressed in community areas of this site do not necessarily reflect or represent the views of Law on the Web, its owners, its staff or contributors. All comments are moderated prior to publication.

comments powered by Disqus