You may have heard that HMRC is planning to make all tax digital by 2020, starting with income tax in 2018. HMRC’s digital personal account is the first step en route to making paper records obsolete. They will no longer be an option for individuals and small businesses, unless their turnover is below £10,000 or they are unable to use/download the software needed (due to age or no internet access for example). The current way of filing online Self Assessment returns will change. You will need to set up a new account and may need to buy HMRC-approved accounting software.
For now, the digital personal account is still in its infancy.
Setting up the account
However, the gov.uk website claims that you can set up access to HMRC’s digital personal account within 15 minutes. I think it took me the best part of an hour. I had to answer a multitude of questions, set up passwords and memorable words and prove my identity. While I do understand that this is for my account’s security and in my own interest, I certainly didn’t find it “easy”. Did you used to file electronically? Is it as complicated to switch as it is to set an account up from scratch?
The big plus: You can now access your National Insurance contribution record online
The personal account is part of the government’s strategy to make tax digital. Full functionality will be achieved in the course of the next few years.
Having gone through the lengthy set-up process, I was full of expectations about what I would find on this wonderful new page.
The only thing worth a mention was that you can see your pension forecast without having to write in and wait for a few weeks. That’s progress for sure.
You can also look at your National Insurance contribution record. In fact, you get an overview of the years you have accumulated towards your pension and annual details of the contributions. Not bad.
What I didn’t see was a button that told me whom to contact, if I disagreed with these records. Now that would be useful!
The future of the digital personal account
HMRC plans to roll out the full new service by 2020. This will bring advantages to HMRC AND their customers:
- HMRC will gather together all tax-relevant information in one place and make it accessible to the individual tax-payer.
- Customers can see an up-to-date running total of their tax liability.
- Taxpayers can see liabilities and entitlements in one place.
- HMRC and customers can interact digitally.
- The government is to receive additional tax income due to avoiding client errors.
So what’s the good news and what’s the bad news?
The good news is that it may offer taxpayers information benefits.
Another bit of good news is that taxpayers with an income of less than £10,000 per annum will probably be exempt from using the digital personal account.
Why is that good news? Because the government estimates that “businesses will incur transitional costs” when moving to the new system. The estimate currently stands at around £280 per business.
This, they claim, is to cover the cost of new software, time spent learning to use the new tools plus additional accountancy costs for the transition period. A minority of businesses may also have to buy or upgrade hardware.
More about this in a future post.