Tax & Admin

The Budget 2016: HMRC to offer pay-as-you-go tax option to self-employed

Hannah Wilkinson | 17 March 2016 | 8 years ago

pay-as-you-go tax

Freelancers and contractors will be able to opt for pay-as-you go tax payment from 2018, following changes outlined in the chancellor’s Budget 2016 speech.

Writing in the document, George Osborne argued that making such payments would enable them on a voluntary basis to choose payment patterns that suit them and better manage their cashflow.

The move comes as part of the government’s transition to a digital tax system that will oblige self-employed individuals to provide HMRC with quarterly updates on their earnings and expenditure.

The newly unveiled public finance plans also include a commitment to invest an additional 71m in the tax authority to improve the service it provides taxpayers. The money will mean that HMRC is able to recruit 800 additional employees and offer a seven-day service by 2017.

Tax and tax credit phonelines are to open on Sundays, while a new dedicated line for new businesses and contractors will be provided to ease the transition to what Osborne promised in his Autumn Statement would be the most digitally advanced? tax system in the world.

The Federation of Small Businesses (FSB) applauded the announcement. The organisation’s policy director Mike Cherry said: Additional resource for HMRC to create a seven day a week service and a dedicated line for small businesses and the self-employed is welcome, as is the plan for every small business to have a named agent to deal with.

our members have expressed concern about HMRC’s poor communications so more needs to be done to reassure and convince small businesses that services will significantly improve. it’s especially important that HMRC is accessible and provides appropriate support particularly at a time when government is proposing to introduce mandatory quarterly tax reporting, which will be extremely challenging for many small firms.

Further moves towards digitalisation announced in the Budget mean that business owners will also be able to receive and pay business rate bills online by April 2017 with local authority business rates systems to be linked to HMRC digital tax accounts by 2022.

Recent research by the Institute of Chartered Accountants revealed that 55 per cent of UK business owners support Osborne’s digital tax plans but highlighted that 82 per cent of one-person businesses are yet to move to digital record keeping.

For expert guidance on how digital tax will impact on your small business, check out our interview with the managing director of Xero.

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