Osborne adds greater transparency to tax system

Friday 4 April 2014

The UK tax system will become more transparent with the rollout of a new scheme that provides detailed statements to taxpayers.

Chancellor George Osborne announced that from October 2014, around 24 million people will receive personal tax statements detailing how much of the levy was paid in the previous year and the role it played in public expenditure.

This number is four million greater than that stated in Budget 2012, when the plan was first revealed.

For freelancers, this will add much needed visibility and the document can then be passed on to contractor accountants.

Furthermore, those who are PAYE taxpayers and have received recent contact from HM Revenue and Customs (HMRC) about how to set out tax calculations earlier in the next tax year, will find the new guidance helpful. The government claims those paying PAYE often have more complicated or changing circumstances and the statements will allow them see things more clearly.

Officials hope that the new scheme will help to simplify the tax system and make it easier to understand.

"These tax statements represent a huge boost for tax transparency, showing people very clearly how much tax they pay and giving them a better understanding of where their money is spent," Mr Osborne said.

For the eight million taxpayers that complete self-assessment returns online, the statements will be made available through this medium.

Those that do not receive a tax statement can still use HMRC's tax calculator to work out their tax bill and see how their money will be used. This app is free from the Apple app store or Google Play.

Mr Osborne's announcement coincides with changes to income tax, which will take effect on Sunday, April 6th.

The government has increased tax free personal allowances to £10,000 for the 2015-2015 year, meaning that in just two days, the typical taxpayer will be £705 better off than they were in 2010.

What's more, contractors working for around 30 hours a week will not pay income tax at all.

It is expected that the changes will take over three million people out of the income tax bracket - a move David Cameron claims is one of the proudest he's made in government.

"A key part of this government’s long-term economic plan is to cut taxes so that people can keep more of the money they earn and feel more financially secure," the prime minister said. "Nearly nine out of ten hard-working people across the country will benefit from this tax cut on Sunday."

The total income tax reductions made for the life of the current parliament is forecast to stand at £1,824.

Over the past four years, the government claims over 26 million people have felt the benefit of personal allowance increases. This is likely to increase next year when the threshold is increased to £10,500 as laid down in Budget 2014.

Research suggests female contractors are the most likely to benefit as overall. Females comprise 54 per cent of the three million people no longer forced to pay income tax.

By Victoria McDonnell

Get in touch

Please select your type of enquiry:

Brookson on Twitter