Budget 2015: annual tax returns scrapped
The government is to scrap self-assessment tax returns in a move that will please millions of individuals and small businesses forced to comply with the "time-consuming" tax return system.
During his Budget speech, Chancellor George Osborne said: "12 million people and small businesses are forced to complete a self-assessment tax return every year. It is complex, costly and time-consuming.
"So, today I am announcing…we will abolish the annual tax return altogether. Millions of individuals will have the information the Revenue needs automatically uploaded into new digital tax accounts."
A "minority" with the most complex tax affairs will be able to manage their account online, he said, while small businesses will operate a single, digital tax account as a result.
"We believe people should be working for themselves, not working for the tax man," Osborne added. "Tax really doesn’t have to be taxing, and this spells the death of the annual tax return."
Further details on the scrapping of the annual return will be published later this year but HMRC has said individuals and small businesses "will be able to register, file, pay and update their information, at any time of the year, using the digital device of their choice".
It added that by the end of the next parliament the digital accounts will remove the need for annual tax returns.
John Allan, national chairman of the Federation of Small Businesses, said: "The idea for a single digital tax account is something we have long advocated - featuring prominently in our 2015 Business Manifesto.
"Implemented properly, this should reduce the time businesses take to complete their tax returns, and offers opportunities to deliver targeted support."
The government also said it would abolish Class 2 National Insurance contributions for the self-employed and extend superfast broadband connection vouchers for small businesses across more urban areas.
"Access to superfast services is a key requirement for small businesses," Allan added. "Delivery of this strategy will be critical to future-proofing the national economy."
The government said digital accounts will be in use by early 2016.
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.