Sweeping personal tax reforms planned
Taxpayers may be able to check their tax records online, the government has suggested as it unveiled proposals to reform personal taxes.
People would be able to view the tax they paid in the current year and previous years, and apply for refunds and tax credits.
The plans also consider how income tax and national insurance (NI) can be combined to make UK tax simpler and easier to understand for employees.
David Gauke, the exchequer secretary, comments: "At the moment, for a lot of people, the tax line on their pay slip is the only time they see just how much they're paying in tax, but the government doesn't think that's good enough. We want to make tax more transparent and we want people to be more engaged with their own tax affairs."
The government pledged in this year's Budget that it would look at ways to integrate income tax and NI. It will now consult employers, tax and payroll professionals and report on progress in next year's Budget.
Other ideas in the Modernising the Administration of the Personal Tax System document include supplying pre-filled tax returns for self-assessment using information from banks and employers and sending taxpayers an annual tax statement.
David Heaton, tax partner at Baker Tilly, says the government's vision is laudable but it is questionable whether HMRC should devote resources to "a technology-based transparency project at a time when its existing systems and staff are under such unrelenting pressure".
He continues: "The government knows that most people don't understand their tax and are aiming to explain it, but there is a real risk that giving people all the extra information, be it via their PC or their mobile phone, will just result in more work for hard-pressed HMRC staff - even if the information is 100% accurate, which is not a given. There is a real need for a big tax education project first so that taxpayers can begin to understand the extra information that will be made visible."
According to HMRC, most taxpayers (around 30 million people) have their tax deducted through the Pay As You Earn (PAYE) scheme.
Heaton adds: "Greater control of personal taxes will always be welcome to taxpayers, but the use of technology will cause questions over security and HMRC will need to reassure the public that their systems are secure and, in view of the recent announcement of yet more millions of PAYE under- and overpayments, reliable."
This article was written for our sister website Money Observer
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.