[28.03.22]

The Government has announced changes to how business profits will be taxed from 2023/24.  The key reforms involve moving from the ‘current year’ basis to a ‘tax year’ basis, meaning that business profits will be calculated for the tax year rather than for the accounting period ending in the tax year. This will align the treatment of trading income with non-trading income.

The move to this new tax year basis will involve a transitional year for many sole traders and partnerships that do not use 5 April or 31 March as their accounting date. This will advance tax liabilities for many. The change will take place in 2024/25, with 2023/24 as a transitional year.

The proposals are now detailed in draft legislation (Finance Bill 2022. The proposals follow the general direction of change for the reform of the Self-Assessment regime, including changes under Making Tax Digital, as well as the recent call for evidence on timely payments, which suggests that there may be an acceleration of Self-Assessment payments.

We are watching this very closely and will advise clients as we learn more, and as the Government, and in particular HMRC, sets out how this new system will be implemented.

Castletons Accountants