The digital tax accounts are designed to reduce hassle for individuals and small businesses that currently need to adhere to the bi-annual payment process and strict deadlines of the 31st October for paper filing and 31st January for online filing. The new process is expected to reduce the time taken to complete a tax return from 40 minutes to 10 minutes on average. This will also result in a cost saving for individuals who use an accountant to help complete their returns.
For small businesses, the new process will help them manage cashflow in their business more effectively. Businesses that experience seasonality trends will be able to contribute more to the tax pot when times are good and reduce payments when the market slows down again. This sort of monitoring will encourage business owners to take a look at their business to assess performance on a more regular basis to better manage the regularity of tax payments to the new digital tax accounts.
The benefit of being linking your bank account to the digital tax account is that, not only can you manage the payments to the tax account to satisfy HMRC requirements, but any rebates will be received very quickly back from HMRC to you. It's simply ensuring that the money is sitting in the right place on an almost real-time basis. You should feel safe in the knowledge that your bank account is not linked for monitoring purposes but simply for payment transfer purposes.
The risk of penalties is now massively reduced now that individuals and small businesses can contribute to the tax account at any time. And for small businesses that have to pay lots of different taxes at different times (VAT, National Insurance, Corporation Tax, Income Tax), the process is getting much easier to manage.
The Government are also working smarter this way with long term savings to be achieved with reduced administration and benefits in payment collections and payments. The knock on effect will be more money available for public services.
There will be a knock on impact to accountants in reduced revenues for those traditional accountants that work with their clients in completing the self assessment process. Zoosme Accountants was set up to work digitally so this news does not impact us and we applaud the Chancellor for introducing a system that offers so many benefits to tax payers and the small business community. I would like to see more small businesses taking steps to keep better records and manage their business performance. Zoosme Accountants have launched a service to help clients adopt the new tax process and start to bring their own businesses up to date with new technology. Click here to get more information.
This news demonstrates that the Government is fully supportive towards small businesses adopting digital processes to better manage finance. I welcome any questions or comments. If you would like to discuss any accounting issues that are affecting your business please contact me on firstname.lastname@example.org.