Online tax accounts and your startup
Fed up with the rush of fiddling around with paper tax returns and receipts every January? A month that doesn’t need any help in being generally terrible, the filing of the tax returns is an occasion of terror for many small businesses – often resulting in penalties and fines.
Now HMRC have officially launched their online Personal Tax Accounts, an online system which aims to provide people with a clearer picture of their tax situation. Every individual and small business should have access to a digital account by April 2016. This is part of a larger drive to modernise the tax system and bring more data about taxpayers into one place, and means that the days of the annual tax return are numbered.
However, if your business is your main source of income, from April 2018 you’ll need to update HMRC every quarter – not just once a year. This also applies in cases where the money is a secondary source of income worth more than £10,000.
Could this help startups and SMEs stay more organised and keep on top of their tax affairs, avoid penalties and help the environment – or could it mean a bigger workload? We ask Andy Fishburn (@AndyFishburn), head of investment at Virgin StartUp, for his views.
“In theory the move online provides a more convenient way to view your tax position,” explains Andy. “It also provides the ability to make payments at any time of the year, which should help prevent the build-up of tax due, and refunds owed, at the end of each financial year. It also reduces the paperwork and the chance of things getting lost in the post, which seems like a logical step forward in a digital age.
“Whilst this is positive step, we have some reservations about the move to require quarterly reporting for self-employed entrepreneurs from April 2018. Completing tax returns four times per year - currently this is just done once through the annual self-assessment - will not only increase the administrative load, but will likely increase the annual cost for those who pay an accountant to help with their tax affairs. Hopefully this will be rationalised down over time, as it currently appears to be at odds with Governments wider efforts to reduce administration in these areas.”
What do you think of this new initiative? Tell us over on @Virgin StartUp!