Online services make it easier to do everything, from paying your gas bill to booking a holiday and ordering the latest bestseller. And that applies to matters financial as well: while the government has offered online tax services for some time, its latest project, the Personal Tax Account (PTA), is much more ambitious.
Launched back in December 2015, the PTA is part of the government’s drive to make tax digital. By bringing together all of your tax information plus a range of services and functionality, it will bring benefits to many taxpayers, says Bill Dodwell, tax partner at Deloitte. ‘The PTA will pull together information from your employer, pension, banks, building societies and so on. This will make it possible to receive any allowances you’re entitled to automatically, and pay the right amount of tax first time.’
While services have been gradually added, the scale of the project means it’s been kept fairly low-profile. According to figures from HM Revenue & Customs (HMRC), of the 30 million or so taxpayers in the UK, 13.1 million have logged into their PTA since it went live in December 2015, with 3.6 million people using it this year.
PTA benefits
Although these are still early days, PTAs already have plenty of functionality. It’s possible, for instance, to file a tax return, check your tax code and work benefits such as your company car, and notify HMRC of a change of address.
For Tina Riches, partner at Smith & Williamson, one of the most significant features is the ability to check your national insurance record. ‘You can have a look at your record right back to when you were 15 years old,’ she says. ‘This shows you where you might have any gaps, but also gives you an estimate of your future state pension. This used to be a much more long-winded process.’
A further quirk of the system, which many will see as a benefit, is outlined by Dodwell. ‘Because employers often file their payroll details to HMRC well before payday, many employees will be able to see what they’re being paid long before they get their payslip.’
Being able to access your tax information online also brings benefits if you need to prove your income for a mortgage or tenancy agreement. Tim Walford-Fitzgerald, partner at chartered accountants HW Fisher, explains: ‘If you’re self-employed, you can use your PTA to print out your SA302 to prove your income. Many of the mortgage providers are happy with this, and compared to the old system where you had to contact HMRC to obtain this information, it will save considerable time and effort.’
Dynamic coding
As well as providing services that replicate those available offline, the shift to digital has also enabled HMRC to introduce ‘dynamic coding’. Brought in last July, this takes into account all of your income and adjusts your tax code throughout the year to ensure the right amount of tax is collected.
Riches says this has the potential to be really valuable. ‘The tax system was designed in the 1940s when most of us had one job for life, so it was relatively straightforward to calculate how much tax you needed to pay. Today, though, you’re likely to have more than one job and a mix of employed and self-employed incomes,’ she explains, adding that this complexity has the unfortunate consequence of unexpected tax demands or overpayments.
But while increased accuracy in tax calculations is a benefit, there are some less welcome side-effects for those with variable incomes. As dynamic coding works out your tax code by annualising your earnings to date in the tax year, if you receive a bonus or you receive income on which you’ve already paid tax overseas, this could inflate the amount HMRC thinks you’ll earn that year, potentially altering your tax status.
Although everything should be correct by the end of the tax year, it can cause major problems, as Suzanne Briggs, director at Blick Rothenberg, explains: ‘As well as significantly reducing your take home pay if your employer has to take off more tax, it could also affect your eligibility for benefits such as child benefit. It needs to be resolved.’
Future functionality
While HMRC may be grappling with this issue, there are plenty more services still to be added to the PTA. These include linking in other taxable sources of income, such as interest from bank and building society accounts and dividends from stocks and shares.
Collecting all this personal information will also enable it to achieve another of its goals – a reduction in the number of people who need to complete a self-assessment tax return every year. ‘HMRC will be able to pre-populate many individuals’ tax returns,’ explains Riches. ‘This will be a very welcome move for many.’
The first stage of this has already started, with two groups of taxpayers no longer needing to fill out a tax return. Instead they will receive a Simple Assessment notification, detailing their position and any outstanding tax. The two groups that will initially benefit are new state pensioners with income higher than the personal allowance in 2016/17, and employees who have underpaid tax but can’t have this collected through their tax code. Next year, the system will be rolled out to include all state pensioners who have had to complete a tax return because their state pension is more than the personal allowance.
Individuals with more complex tax affairs will also see changes. ‘Where HMRC can’t collect information on your income, for instance if you’re self-employed, the PTA will facilitate the move to quarterly filing,’ explains Briggs. ‘This will make it easier to manage your tax.’
But the scale of this change will bring some issues. For instance, Riches says buy-to-let landlords may find themselves under more pressure to gather information. ‘It can take time to collect all the details together, especially where a landlord has a letting agent that takes care of some of the expenses. They may need to change their systems to get the necessary information on time.’
Take action
Although there are certainly challenges ahead, Walford-Fitzgerald recommends checking out your PTA if you haven’t already. ‘The ostrich approach won’t help,’ he says. ‘I’d strongly recommend making sure your details are correct and that you keep an eye on it on a regular basis. HMRC does make mistakes, and you might even find you’re overpaying tax and due a refund.’
However, while the accountants recommend logging into your account, they also have a note of caution for their clients. ‘The PTA has been designed for individual taxpayers who don’t have an accountant,’ explains Riches. ‘If you do have an accountant, speak to them before you change anything as it might conflict with work they’ve already done on your behalf.’ But, whether using an accountant or not, with HMRC making more and more of your information available through your PTA, it’s well worth logging into your account to ensure it’s correct.
What services are avlaible on Personal Tax Accounts?
A wide range of services are already available on HMRC’s Personal Tax Account, with further ones set to be added over the next few years. Currently you can:
- Check your tax code and income tax estimate for the year
- Complete, send and view your self assessment tax return
- Check and update benefits you receive at work, for instance a company car or medical insurance
- Check and update your tax credits and marriage allowance
- Check your national insurance record
- Get a state pension forecast
- Claim a tax refund • Notify HMRC of a new address To register, you’ll need to visit HMRC’s PTA website and use your government gateway account details to sign in. If you don’t have these, you can register for an account. Once you receive an activation code, you can log in. For increased security, HMRC will send an access code to your phone to confirm your details and you’ll also need to confirm your identity when you first visit by providing details from your bank account, passport, or your P60 or recent payslips to gain access to your PTA.
This article was written for our sister magazine Money Observer.
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