Basis Period Reform for the 2023/24 tax year is now in motion, so it’s crucial for self-employed individuals, including business partners, to take prompt action
This reform was introduced by HMRC to change the timing of when trading profits are taxed. It affects only self-employed individuals and does not apply to limited companies
The reform aims to simplify tax reporting by aligning taxable profits with the tax year (6th April – 5th April), regardless of accounting dates. While this change intends to end complex basis period rules and overlap relief, it also brings challenges, particularly for businesses whose accounting periods do not align with the tax year.
A transition period in 2023/24 involves profits being calculated from the end of the 2022/23 basis period to 5 April 2024 and may result in higher taxable profits. However, the extra tax due on 31 January 2025 on these accelerated profits can be spread over five years to mitigate immediate tax impacts.
We are already preparing tax returns for clients affected by the new rules. So, to ensure a smooth transition and compliance, please provide us with all necessary information to allow us to prepare your accounts and tax return.
And remember our secure portal to send and receive information efficiently. If you’re not using the portal yet, get in touch with your normal James Milne contact for details on how to get started.
Finally, if you’re not sure how Basis Period Reform affects you and how your tax bill will be calculated, please contact us and we can explain how it works.