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The new system of personal tax accounts, which will eventually replace annual tax returns, is being launched by HM Revenue & Customs (HMRC).

The system of online accounts will be similar to online banking, HMRC says.

The new accounts will allow people to see their tax details and make payments at any time of the day or year.

The roll-out for individuals is being phased in, for people currently in the self-assessment system.

All personal taxpayers will have personal accounts by April next year, as will all of the country's five million small businesses.

Two million businesses are already using the new system.

The government says one advantage of the new digital tax accounts is that they should stop the build up of tax due, or refunds owed, at the end of each financial year, with no more surprises or shocks for tax payers.

"The launch of personal tax accounts is a groundbreaking development for HMRC and our customers," said Ruth Owen, the director general of personal tax at HMRC.

"Remember when you started banking online? Well, this is the equivalent shift in service for the majority of our customers wanting to do business with us online."

Combined system

The HMRC's aim is that by 2020 the new digital accounts will encompass all taxpayers, individual or corporate.

Businesses including the self-employed and landlords will, from April 2018, have to update HMRC every quarter where this activity is their main source of income.

That obligation to report quarterly will also apply where the money is a secondary source of income worth more than £10,000, and the main income is from employment or from a pension.

Behind the scenes, HMRC plans to bring all the information it holds on a taxpayer into one system, including data from employers, banks, building societies and other government departments.

This will eventually lead to the demise of the annual tax return for most taxpayers and so the current system of self-assessment, introduced in 1996 and now largely online, will wither away.

"Self-assessment for individuals and small businesses (including companies) will work through digital tax accounts, so there will be no need for them to send in annual tax returns," an HMRC spokesman explained.

"Obligations on customers, such as to inform HMRC of taxable income or to provide information relating to that income, will not change where HMRC does not have the data from another source.

"Taxpayers will still have to confirm their information is correct and make sure the right tax is paid," he added.