The biggest shake-up in personal tax for 20 years

HMRC have recently published six consultation documents on the ‘Making Tax Digital’ strategy – the biggest shake-up of the personal tax system in 20 years. These documents set out HMRC’s plans to move to a fully digital tax system by 2020, with the aim of making the tax system more efficient.

The government first announced the project in the 2015 Budget but has now provided additional details of the proposals for consultation.

The consultation documents

The six consultation documents cover:

  • Bringing business tax into the digital age
  • Simplifying tax for unincorporated businesses
  • The simplified cash basis for unincorporated property businesses
  • Voluntary tax payments in advance of liabilities being due
  • Tax administration
  • Transforming the tax system through better use of information

You can view the consultation documents in full here.

In summary

HMRC plan to make fundamental changes to the way tax reporting is carried out. Business owners and landlords will be required to keep records digitally and update HMRC more frequently than is currently the case. These reforms will be introduced from April 2018.

By 2020 most businesses and landlords will have to use software or apps to keep their records and report to HMRC on a quarterly basis. Tax returns will be replaced by an End of Year declaration which will need to be filed within 9 months of the end of the period of account.

HMRC also intend to make changes to some of the underlying tax rules for businesses and amend HMRC’s compliance and enquiry powers. This will include the introduction of a new regime for late submission penalties, late payment sanctions and proposals to align interest across taxes.

Those taxpayers who are likely to be exempt from the changes include:

  • All unincorporated businesses and landlords with an annual income of less than £10,000;
  • Charities and Community Amateur Sports Clubs (CASCs) and;
  • Those who cannot engage digitally


Craig Walker, Senior Tax Manager at Hawsons commented: “The proposals are radical and wide ranging, and clearly significant consultation is required. There are deep concerns within the profession and the business community that HMRC’s plans are overambitious and unrealistic, the proposals will place additional burdens and costs on businesses, and the current timetable for implementation is unworkable.”

“Although the concessions for businesses with income below £10,000 are welcome, much more still needs to be done by HMRC to address the legitimate concerns of businesses.”


More on Making Tax Digital

Over the coming weeks and months, we will provide further details on the new initiative, commenting on the new consultation documents and what they mean to taxpayers and the personal tax system.

The consultations are due to run until 7 November 2016, with the government expected to provide draft legislation as part of the 2016 Autumn Statement. We will provide further analysis as the matter develops.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

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Craig Walker is a senior tax manager at the firm. He advises on all matters tax related, both corporate and personal, including income, capital gains and inheritance. For more details and advice, please contact Craig on [email protected] or 0114 266 7141.