So, the government has come up with yet another change to the tax system under the premise of making taxes more straightforward. However, what does this actually mean? And does it apply to you? We cut through all the jargon and explain what this new ‘Self-Assessment’ form is all about.
What does this mean?
This is an improvement on the outdated method of collecting PAYE tax underpayments. It is one of many changes being made as part of the government’s commitment to abolishing tax returns entirely. The ‘old’ way of dealing with underpaid PAYE for the year would be a P800 tax calculation sent in the post. Sometimes this is arranged automatically, but often it involves a lengthy process of form-filling and providing information about your income. This is then followed by one or more requests for voluntary payment. If, for some reason you did not pay voluntarily, then you are put through a complicated ‘self assessment protocol’ in which you run the risk of late filing penalties.
Going forward you will instead receive a PA302 simple assessment. This looks similar to a P800 tax calculation but - as the name suggests - is a lot simpler. This is because HMRC is now actually utilising the data they hold (e.g. details from employers, pension providers, banks and building societies) to compile the information they need to generate the correct tax assessment without the need for you to complete an entire tax return using the same information year after year. So, for those of us with straightforward tax affairs, this can even entirely remove the need to fill out a tax return, as HMRC will use data it already holds and calculate what tax is owed. To be clear: the new rules may mean that you are no longer required to file a tax return but it doesn’t mean that you can get away with not paying the tax! And of course, if you still don’t pay your PAYE underpayment within the allotted time, then financial penalties may be applied in line with current policy. But because the whole system is a whole lot simpler and more streamlined, then you are less likely to find yourself in this situation.
What if you don’t qualify for a Simple Assessment?
For those who have more complex tax affairs you will still have to do a ‘Self-Assessment’ for the time being. However, you should benefit from this modernised process in the future too. This means you will only be asked for information needed to assess your tax, benefits and credits; HMRC will complete the rest of the information automatically.
What if my circumstances change?
As ever, whether your tax circumstances are simple or complex, if your situation changes throughout the tax year, you are still expected to inform the HMRC immediately. They will update your records and proceed accordingly.
If at any point you feel that the information the HMRC has is incorrect, or the tax amount is wrong, then you can contact the HMRC directly. You also have the right to appeal against any tax decision made if it is incorrect.
All in all, we think that this new initiative is a positive change for all tax payers. But if you are struggling to get your head around this, then please do not hesitate to get in touch. We’ll happily answer any queries you may have.