The end of the annual tax form will be announced by George Osborne today as he promises to bring in digital tax accounts for all individuals and small businesses.
They will work like online bank accounts and keep an up-to-the-minute record of all the tax someone owes or has paid. And like bank accounts, will be accessible at any time from a computer, smartphone or iPad.
The Treasury believes the switch to digital will make it much easier for the 11m taxpayers and 1.8m companies who currently fill in an annual tax form to pay the right tax at the right time without filing a return. It describes the current system as “complex, costly and time-consuming”.
Officials claim the system will cut the time it takes to complete tax returns from an average of 40 minutes to just 10 minutes a year.
Because the system will be automatically updated with information from employers, pension providers or banks, taxpayers will not have to submit duplicate information about their income.
People will also be able to pay the taxes they owe when it suits them – for example, by linking to a bank account so they pay in instalments or by Direct Debit.
The reform is the centrepiece of an intensely political Budget.
The switch to online tax returns is expected to start with five million small businesses and the first 10 million individuals in early 2016.
By 2020, businesses should be able to link their accounting software to their digital tax account, so they can feed in information directly.
People who wish to continue filing a paper return will be able to do so.