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Yearly tax returns to retire by 2020

(Image credit: Image source: Shutterstock/Creativa Images)

By 2020, you'll no longer need to fill your yearly tax return, if all goes according to plan. Instead, taxpayers will get to update their revenue online, continually. 

This is a part of the HMRC's Making Tax Digital initiative. It says it will save taxpayers £8 billion every year, in taxes. The announcement was made after eight months of consulting with businesses and workers. 

According to the announcement, businesses will use a spreadsheet to record receipts and their spending. The spreadsheets will then be linked to a software program to generate and send updates directly to the HMRC.  

The software will be available to pretty much everyone, and will be free to download and use. HMRC said it will extend its options to account for income and expenditure on a simple basis of 'cash in-cash out'. 

And finally, taxpayers will have at least a year's worth of time to get acquainted with the changes before any penalties apply.

"The appetite for digital services is growing and traditional paper-based processes make no sense in the 21st century where the vast majority use digital services," said Jim Harra, HMRC's director general, customer strategy & tax design.

"We know that the majority of businesses want to get their tax right first time, but the latest tax gap figures show that too many find this hard, with more than £8bn a year lost in tax as a result of avoidable taxpayer error by small businesses,” he added.

"Making Tax Digital will help businesses to get their tax right first time; it will help reduce the likelihood of errors, lower the chance of unwelcome compliance checks and give them greater certainty that they are getting things right."

Image source: Shutterstock/Creativa Images