Chancellor Phillip Hammond wants to take tens of thousands of small businesses out of the digital tax system while simplifying the way they keep accounts.
The measures are explained in detail in a series of new consultations issued by the Treasury and HM Revenue and Customs (HMRC).
A key move is to raise the threshold for cash accounting and to give small businesses trading under the threshold the choice of opting out of posting rolling quarterly updates online.
Cash accounting would mean a business pays tax on profit calculated as income less expenses rather than on invoices issued and payments due.
HM Revenue and Customs (HMRC) explains the long term aim is to do away with annual tax returns in favour of digital accounts that take in information from banks, building societies, pension providers and other government departments in real-time.
The disadvantage for personal taxpayers, the self-employed and contractors is that they will pay HMRC what they owe in tax quicker rather than waiting until the January following the end of the year when money was earned.
This is good news for the government as cash flow is improved and smoothed over a year rather than coming in a flood at the end of January each year.
Changing the cash accounting threshold from £83,000 a year up to £150,000 would give 155,000 small businesses the chance to opt out of digital tax returns.
The Chancellor also wants to exempt thousands of businesses turning over less than £10,000.
Other big changes up for discussion with the government include scrapping capital expenses to make accounting easier by offering a 100% upfront deduction in the year when an asset is bought and simplifying the rules for setting accounting periods.
Coupled with cash accounting, the latter would do away with apportioning income and expenses to tax years.
Financial Secretary to the Treasury Jane Ellison said: “We are committed to a transparent and accessible tax system fit for the digital age, and Making Tax Digital is at the heart of these plans. This new system will make the UK’s tax administration more efficient and straightforward, and will offer businesses greater clarity when it comes to paying their tax bills.”
Click here to read the HMRC/Treasury consultation papers