Self-assessment axed: the celebs who could have been saved

George Osborne is scrapping self-assessment - saving celebrities from the spectre of an unexpected tax bill

Britain Budget

Today George Osborne sounded a welcome death knell for self-assessment. In five years time, the arduous process will be axed, to make way for personal tax accounts.

These will be opened online and HMRC will automatically be able to keep track of all the tax you owe without any of the form-filling rigmarole. Frankly it's about time, because the current system is ridiculous, and has landed an awful lot of people in hot water.

Currently, 12 million people have to collect reams of paperwork and prepare a tax return at the end of the year. For the millions of self-employed people (including most celebrities) it means trawling through invoices and statements for everything from savings accounts to share dividends, tracking down everything you made and spent, and inputting it all carefully - so you don't make a mistake and have to start again.

The change

In future, this information will be fed automatically into the HMRC systems, which will use details from the banks and investment companies to see what you are making from your investments. They'll also automatically know what you are making from any employment and from your pension.

It'll save a massive headache at the end of every January for everyone who is has to complete a self-assessment tax return.

More to the point, you can also change the way you pay this tax. At the moment, you pay it a year after you earned the money, which gets some people tied in knots. It means that something you earned in May 2013 won't be included in your accounts until April 2014, and the tax won't be paid for in full until January 2015. You make a payment on account halfway through the year, but you are still a year behind.

For those people whose income is erratic and unpredictable, this can cause a nightmare. There are plenty of celebrities who have struggled to master this, and ended up in serious trouble because they spent the money before the tax bill landed.

Celebrities caught out by a tax bill

Celebrities caught out by a tax bill

In future you will be able to pay your tax in regular instalments - based on what you owe. You can even do it by direct debit. It means no nasty surprises, and no sudden and unexpected tax bills to push you over the edge. Celebrities all over the country must be breathing a huge sign of relief.

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