CHANCELLOR George Osborne will today announce the start of a 21st century revolution in how millions of people pay their taxes with the end to the dreaded annual return and the introduction of personalised digital accounts.

 

The new accounts will be accessible at any time from a smartphone, computer or iPad, creating a "one-stop shop" for all tax issues.

The Treasury believes the new system will make managing tax affairs much easier for individuals and businesses, ensuring they will pay the right tax at the right time without having to fill in what many regard as a burdensome annual return.

However, people who want to continue to use the paper returns can continue to do so if they prefer but by 2020 it is expected some 12m people will no longer be filling out an annual tax returns.

Some 11m individuals, four million of whom run their own businesses, as well as 1.8m companies have to fill out a yearly form. They have to tell HM Revenue and Customs (HMRC) information it already knows such as earnings and pension income while businesses have to pay different taxes at different times.

The new accounts will bring together taxpayer's details in one place and, like an online bank account, will enable them to log on and view all their tax affairs at any time, automatically update HMRC on information about their tax affairs and pay their taxes at a time in the year that suits them.

By early 2016, 10m people and all of the UK's five million small businesses will have access to their own digital tax accounts. The following year the first taxpayers, who no longer wish to fill out an annual tax return, will not have to do so.

By 2020, some 55m people across the UK will have a digital tax account.

Growing businesses will no longer face a big end-of-year tax bill because under the new system HMRC would have calculated their payments on last year's tax information.

Instead, they will be able to automatically share information on their financial affairs in real-time by linking their own accounting software to their digital tax account; providing firms with timely information on the tax they need to pay and removing the need for an annual return.

The UK Government will set out the details on how it will deliver the new digital tax accounts later this year and will consider any funding requirements for HMRC as part of the next Spending Review.

The major shake-up comes as the Chancellor delivers his sixth Budget, in which he is expected, thanks to a £6bn windfall to the Treasury coffers because of lower borrowing forecasts, to give voters an effective tax cut.

At the weekend, Nick Clegg revealed how he had been pressing Mr Osborne to introduce a further rise in the tax-free personal allowance, which is due to rise to £10,600 in April. The expectation now is that it will rise to £11,000, giving people around £300 extra a year.

But the respected think-tank, the Institute for Fiscal Studies, has suggested a better way to help the lowest-paid workers would be to lift the threshold for National Insurance, which kicks in at £7956.

Some believe the Conservative Chancellor might seek to spike Labour's guns by announcing his own raid on high-earners' pension pots, raising an extra £1.5bn from the wealthiest in society, to increase the NI level, producing an effective tax cut.

Ahead of the last set-piece event of the Lib-Con Coalition, Ed Balls, the Shadow Chancellor, said: "This Budget cannot hide the fact that after five years of the Tories, working families are worse off and our NHS is going backwards."

He added: "The IFS says the Chancellor's tax and benefit changes since 2010, including the big VAT rise, have cost families on average £1127 a year. No pre-election tax cut can make up for that."

John Swinney, the Deputy First Minister, said the Budget provided the last opportunity for the Chancellor to scrap his failed austerity measures, adding: "I hope the Chancellor will have listened to reasoned proposals ahead of delivering his Budget and that economic growth and tackling inequality will be given equal representation in this final one before the General Election."

Meantime, David Cameron has announced he will take part in a single televised leaders' debate on ITV on April 2. The Prime Minister said it could form part of a range of election-related programmes involving the leaders, including in-depth interviews and town hall-style question and answer sessions with the public.

The broadcasters welcomed the Tory leader's willingness to participate in the April 2 debate but said they would continue to work with all the parties on programmes scheduled for March 26, April 16 and April 30.

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