Businesses and individuals will be able to link their own accounting software and their bank account to the digital tax account, removing the need to submit an end-of-year return and paying an annual tax bill in one go.
People will be able to pay their tax at any point throughout the year. They will also be able to spread the cost by paying in instalments.
Describing the move as a "revolutionary simplication of the tax collection scheme", Osborne added:
"Twelve million people and small businesses are forced to complete a self-assessment tax return every year. It is complex, costly and time-consuming.
"We will abolish the annual tax return altogether. Millions of individuals will have the information the revenue needs automatically uploaded into online accounts."
Jamie Morrison, private client partner at HW Fisher & Company, commented:
“Few of Britain’s five million self-employed will mourn the passing of the annual tax return. The mad rush to dig out receipts in January is an annual torture for many.
“But the idea that the HMRC will simply automate everything is fanciful, and won’t help anyone other than those with the most straightforward tax affairs.
“And ditching the idea of self-assessment for state assessment of our tax liability has an Orwellian whiff to it.
“Rumours of the death of accountants are exaggerated too – the reality for most self-employed people is that they will continue to need expert help to get all the tax relief to which they’re entitled."
