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Xero Tax personal tax module, spring 2021

Xero previews personal tax for summer release


Xero is set to disrupt the UK tax software market with the launch of a personal tax module that will be free to accountants who are part of its partner programme.

2nd Mar 2021
Editor in Chief AccountingWEB
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In an online preview last week, Xero director of operations Damon Anderson said the new personal tax module would be added into Xero HQ “this summer” to enable practices to process 2020/21 tax returns ahead of next January’s self assessment deadline.

“We want to give each one of you your January back,” Anderson vowed, explaining how the personal tax app would fit into a broader workflow that will bring in business income from Xero ledgers and allow users to add data from self-employment, property and other income sources.

Anderson said work was in hand to adopt the quarterly processing and annual summary filing mechanisms required as Making Tax Digital for income tax comes into play over the next two years.

The integrated personal tax model is built around Xero’s promise to save time with a “unified Xero HQ experience” that links tax and accounting processes more closely. For rival suppliers, however, the most disruptive element of Xero’s offering is the price. “Xero personal tax will be free,” Anderson confirmed.

Online demo

It’s hard to get excited about a personal tax calculation application, but most of the things you’d expect to see were present and correct in the pre-release edition.

The tax module can be accessed from the user’s Xero HQ dashboard and includes its own client summary page that lists them by name, reference, tax year and job status.

Client details, PAYE information and payments are listed on the left-hand side of the Xero Tax screen, along with a menu of “schedules” showing different SA form input options.

Action buttons at the top of each screen allow the user to validate the data entered against HMRC rules and progress the return to its next stage. If the validation routine finds anything, it flags up an orange or red warning message. The latter needs to be corrected before the return can be filed, but orange alerts won’t block your progress, said presenter Perry Gemmell.

The Summary dashboard includes a toggle to display the previous year’s figures underneath each box in a small orange highlighted panel.

Once a return is ready for client approval and submission, Xero Tax asks for a client confirmation before finalising the return and opening a connection to HMRC’s self assessment gateway. In the near future, Xero Tax will be able to administer client approvals using a connection with Adobe Sign, said Gemmell.

In process terms, Xero Tax has abandoned the principle of slavishly mirroring the SA form layouts – though PDF versions of the final returns can be output for client approvals or record-keeping. The Xero team emphasised it’s still a work in progress that would be supplemented with improvements in various areas including payroll integration, comparative tools, dividend feeds and HMRC data imports.

Strong impression

It was apparent that Xero Tax was making a strong impression among the preview viewers, many of whom started firing queries and requests at the presenters for other features including “fetching” data from clients, capital allowances calculations, charity accounts and Charity Commission submissions, agent authorisations and agent services account integration.

AccountingWEB contributor Della Hudson was one of those accountants posing questions during the online session. Afterwards, she gave her impressions: “I can’t think of anything negative to say about it. I’m a new practice and all my clients have pretty simple tax affairs. We’ll use our own tax returns as a dummy run first and if we like it, we will switch all our clients.

“There’s no point in running two systems, especially when one does the job adequately and is free.”

Hudson corrected herself by noting that during the 2023/24 tax year, she would have to run the new quarterly reporting system in parallel with the preparation of traditional 2022/23 self assessment returns. But she remained comfortable that Xero would manage the MTD transition successfully. “Sometimes you have to trust your supplier,” she said.

“I don’t think Xero Tax is going to revolutionise tax preparation, but I’m quite excited to have everything within Xero. It’s going to change the dynamic of my firm. It simplifies compliance so I’ve got more time to do the useful stuff. And the cost-saving is great.”

Replies (3)

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By AdShawBPR
03rd Mar 2021 10:40

I've used Xero for over 11 years but until it sorts out its MTD VAT Return process I'll not be using personal tax any time soon.

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By North East Accountant
03rd Mar 2021 16:47

It needs a schedule of all entries and a tax calculation.... all old fashioned desktop software can do this..... Xero Personal Tax needs those too.

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Replying to North East Accountant:
By garethprice
05th Mar 2021 15:15

Hi. The sneak peek we gave was to provide an update on how we are going with the development of personal tax for Xero Tax. It's currently in beta, and we will be launching it this summer.

We are still developing the technology. As part of this, we will be adding more schedules and are building the tax computation report.

We will be keeping everyone updated once we are ready for general release. Stay tuned.

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