Tax experts are concerned that the self-employed are unaware of an HMRC rule change on reporting profits, according to the Financial Times.
The change, known as Basis Period Reform, will affect 528,000 sole traders and partnerships whose accounting years don’t end on April 5 or March 31. From April 2024, they’ll have to report their taxable profits to HMRC up until April 5, even if their accounting year ends at a different time.
You could be affected by the new tax year basis (also known as Basis Period Reform) if both of the following apply:
- you are self employed or in a trading partnership
- your business accounting year end does not match the tax year (is not on or between 31 March and 5 April)
If either of these do not apply, you will not need to do anything differently. You will not be affected if you are an employee or company director.
If you are affected, you will need to change the way you complete your Self Assessment tax return from the 2023 to 2024 tax year.
Changes to how you report profit
Up to 5 April 2023, the basis period reporting rules applied. This means you reported profits according to your business accounting year end date within the relevant tax year (between 31 March to 5 April the following year).
For example, if your accounting year end date was 31 December 2022, you will have reported profits on your 2022 to 2023 return for the whole year (1 January 2022 to 31 December 2022).
From 6 April 2023, the new tax year basis applies. This means you will need to report profit up to the tax year end, even if your accounting year ends at a different time.
If your accounting year end is not on or between 31 March to 5 April, your profits may need to be apportioned between accounting periods.
Visit gov.uk for details about the change or contact us for further information.