Tax Reform proposition approved
On 4 November the States Assembly agreed to move all prior year taxpayers onto a current year.
The means that if you are a prior year taxpayer the payments you have made in 2020, for your 2019 tax bill, will now be used to pay your 2020 tax liability. From 2021 you will become a current year taxpayer and your 2019 tax bill will be frozen, though you will have to pay it in future. Payment options to pay your 2019 tax liability are being developed (see payment options below) and will be debated by the States Assembly in early 2021.
Importantly, this also means that all taxpayers who pay their tax by 'payment on account' through the year (rather than by ITIS) do not need to pay the balance of their 2019 bill in November 2020, but they can if they wish to do so. The next 'payment on account' will be due by 31 May 2021.
All prior year taxpayers will receive a letter from the Comptroller explaining what to expect in the next few months.
Copy of tax reform letter
Tax reform and 4 steps to change
We have 4 steps to complete before we can give you certainty on whether you have a credit or balance to pay when you become a current year taxpayer.
Revenue Jersey will complete all 2019 return assessments, which will confirm the amount of tax that will be frozen.
Revenue Jersey make the 'switch over' early in 2021, and you'll become a current year taxpayer. Changes will be made to our records to move all the payments you have made to cover your 2019 liability, towards your 2020 tax bill.
You file your tax return. In it is all the information we need on your income and any allowances you may be eligible for, which we need to know so we can assess the tax due on your 2020 income.
In February 2021 we'll start assessing returns for prior year taxpayers, in date received order, checking the tax you paid in 2020 against the tax owed for 2020. We'll send you your assessment and if you pay by ITIS a revised current year rate will also be included.
Confirming your balance
We can't complete Step 4 until we have your return, so if you're keen to get certainty on whether you have a balance to pay or a credit due for 2020, complete your 2020 tax return as early as possible, and if you can, do it online as this helps to speed up the assessment process.
Complete your tax return online
If you didn't file online last year you'll still receive a paper return, but you'll have the option to switch to online filing.
If you are in credit on your account
We won't know if you have a credit on your 2020 tax until we have assessed your 2020 tax return. If your transferred payments have overpaid your 2020 tax, you will receive a nil balance to pay on your 2020 tax bill. If you pay by ITIS you will automatically get a reduced ITIS rate and you don't need to take any further action.
If you don't want a reduced rate or if you pay on account you can request:
- a refund of the credit
- any credit goes towards your frozen 2019 tax liability
Checking your 2019 tax liability
Your 2019 tax liability is stated on your 2019 notice of tax assessment. If you've not received it yet, you should get it through the post by the end of the year. We will only be able to tell you your 2019 liability once your assessment is complete and we post these to you as soon as they are done. We are working to get all assessments completed as quickly as possible.
The proposal to move all personal taxpayers from a prior-year payment basis to a current year payment basis will apply equally to General Partnerships.
The 2019 liabilities of general partnerships will be frozen and all 2019 year of assessment payments made will be transferred and set off the 2020 year of assessment liability.
These partnerships are not therefore required to pay the balance of the year of assessment 2019 tax liability which is due 30 November 2020 but they can if they wish to do so.
Two phases of reform
In July 2020 the Minister for Treasury and Resources wrote to all personal taxpayers to outline her plans to move all Prior Year Basis (PYB) taxpayers onto Current Year Basis (CYB).
Around two-thirds of taxpayers currently pay their tax for the previous year in the current year. For example, in 2020, these taxpayers are currently paying for their 2019 tax liability through their 2020 earnings. For tax purposes, this is known as Prior Year Basis.
The proposals were to be delivered in 2 phases:
An Amendment to allow Revenue Jersey to freeze the 2019 tax liability and use 2019 tax payments to pay the 2020 tax liability.
Regulations, that would govern how the frozen 2019 tax liability would need to be paid.
In August 2020 we ran a survey for Islanders to submit their views on the PYB Tax Reform Proposal. You can read the full report on the survey findings here. We also ran focus groups during October 2020 and emerging findings helped shape Phase 2 of the Proposals, the Regulations.
PYB Tax Reform proposal survey and findings
Developing the payment options (Phase 2)
draft proposals for the payment of the tax liability of Prior Year Basis taxpayers is available on the States Assembly website. These options are being further developed using public focus group findings, and the States Assembly will debate the final payment Regulations in early 2021.
The full focus group findings will be available to Revenue Jersey from mid November and will be used to further develop payment options, along with feedback from Assembly Members and industry representatives.
Close dialogue with the Corporate Services Scrutiny Panel will continue.
Focus group findings will be published during December.
Draft regulations and supporting documentation will be ready to lodge in early 2021 and must be agreed by March 2021 as detailed in the Amendment law.
Work to develop and deliver the payment collection system will then commence.
Paying your 2019 tax liability
Regulations that will govern how you pay are still being developed.
Current proposals suggest that you will have nothing to pay until 2025, and you will then have a choice of two ways to pay:
Payment by 2042 using a 20 year payment plan. The plan will start in 2022, but you don't actually have to start making payments until 2025.
Regular payments on an annual basis would be expected and options to pay monthly (also quarterly and half yearly options) would be available. You can pay your 2019 bill over a shorter period than the 20 years if you wish.
2019 tax repayment calculator
Payment when you reach States pension age using your own existing financial arrangements or putting new arrangements in place. You will be asked to provide evidence of the arrangements you have in place and the payment would be due within 12 months of you reaching States pension age.
A form will be provided (online and on paper) for you to make your payment choice.
Payment requirements of the frozen 2019 year of assessment liability for these partnerships is currently under review.
When a 2020 bill is significantly higher than the 2019 bill
We accelerated work to bring in this change, because we are aware many islanders have suffered much reduced income in 2020 and face a 2019 bill they cannot pay from their smaller income.
However, we recognise for some the situation may be reversed. If you find yourself with a significantly higher 2020 tax bill than your 2019 one, for example, through returning to work after maternity leave, please don't worry. Whilst such cases will be exceptions, Revenue Jersey is putting some specific 2020 shortfall payment options in place to ensure such situations are dealt with sympathetically and fairly and we can minimise the impact for you.
Timetable of activities
This is what will happen over the next few months:
|November||People who pay their tax by 'payment on account' through the year (rather than by ITIS) do not need to pay the balance of their 2019 bill in November but can if they wish to do so.|
|November / December||Provisional ITIS rates for 2021 are provided to all employees. These do not reflect the move to CYB as this happens in January 2021. You'll receive your first 'CYB' ITIS rate when we assess your 2020 tax return next year.|
|November / December||2019 tax returns continue to be assessed. There are currently around 7,000 left to be assessed and we are aiming to complete these by the end of the year. Your 2019 tax assessment is the amount of tax that will be "frozen" for payment in the future. |
Prior Year Basis taxation explained
Before we introduced the Income Tax Instalment System (ITIS), islanders usually paid their whole tax bill in one payment each year. There was no option to pay instalments from your salary.
The Taxes Office would not know what taxpayers owed in tax until they submitted their tax return in the following year.
A new taxpayer would have a tax liability in their first year but would pay no tax until the year after.
a new taxpayer started work in January 2001, earning £20,000 that year
the tax would be in the region of £2,300 on their 2001 income, but would not have a bill to pay until 2002
tax returns for 2001 were sent out at the start of the following year (2002)
- the completed 2001 tax return would be received during 2002
- it would be assessed, but the bill would not go out until September 2002, when all tax assessments went out the same time in a general issue
- they would have until December 2002 to pay their 2001 tax
In this way, before ITIS was introduced, all islanders paid their tax on a Prior Year Basis (PYB).
Income Tax Instalment System (ITIS) introduced
In 2006, the way islanders paid their tax changed when we introduced the income tax instalment system. This collected monthly instalments from your salary if you were employed or if you didn't have employment income, you paid an instalment yourself early in the year and a balancing payment at the end of the year.
For most taxpayers this changed the way tax was paid but it didn't change the year they were paying. Payments still went to the previous year's bill. So in 2006 the instalments went towards the 2005 tax (prior year basis).
The tax from the previous year is always payable, but due in the following year. This can cause payment issues for anyone whose income drops in the following year, for example through retiring or redundancy.
New taxpayers from 2006
There is a group of taxpayers where payments don't just go to the previous year's unpaid tax.
Instalments from employed taxpayers who registered for tax from 2006 go towards the same year's tax (current year basis). So in 2006 any instalments went towards the estimated 2006 tax and then continued on this basis.
The Income Tax Instalment System (ITIS) rate is calculated from the registration information the taxpayer provides and then estimated each year after that based on the previous year's tax assessment. The rate can be updated by the taxpayer if their income changes to make sure they don't underpay.
This tax is then finalised the following year when the return is submitted and any unpaid balance would need to be paid or a repayment would be due if the tax was overpaid.
This left people who newly registered for tax from 2006 or returned to Jersey after an absence to pay on a current year basis. Anyone who was an existing taxpayer before 2006 continued to pay on a previous year unless they opted to pay in advance and move to a current year.
This has been the status quo until this tax reform.
How the Income Tax Instalment System (ITIS) works
How the Income Tax Instalment System (ITIS) rate is calculated
Understanding your assessment