The government has made proposals for a new system of tax payments by businesses. Read on to find out how this might affect you.
During the 2015 Autumn Statement, Chancellor George Osborne made it clear that we can expect major reforms to the way tax is managed. The main change was the move away from paper towards digital services, but it was implied more reforms were on their way. Now, the government has revealed proposals that businesses might be required to pay tax monthly, rather than once or twice a year.
The announcement came as a shock to many and the reactions are mixed. From the government’s point of view, it makes perfect sense, as it means receiving your money sooner. On the plus side, if these proposals come to fruition, at least you will never again be hit by large and/or unexpected tax demands.
Who will be affected?
In an effort to ‘simplify’ the tax system, the government has stated that “companies, partnerships and individual taxpayers who are self-employed and those letting out property” will all be required to pay tax more frequently.
The government has emphasised the fact that they don’t want the new style tax payments to be estimates on account of your actual tax liability. Instead, the government wants new the new style payments to reflect your actual profits for the month (or whichever payment period is decided on). What does this mean for you? Well, this means you’ll have to keep records of some sort to work out each tax payment. It has been suggested that businesses will be able use an online system to submit these records.
When will this come into effect?
According to the government’s discussion paper, the timetable for introducing the new system is 2020 at the latest. The government is committed to pushing through this major change, so if record keeping is not something you tend to do, it’s something you should try and get in that habit of doing sooner rather than later.
To download the full discussion paper, click here.