New rules

The rules HMRC use to work out sole traders’ and partners’ profits for Income Tax in a Self Assessment return are changing for many businesses for the tax year 2023 to 2024 onwards. This may affect the return that they must submit by 31 January 2025. It will also affect subsequent returns.

Only taxpayers with an accounting date other than 31 March or 5 April are affected by this reform.

Under the new rules, from April 2024, businesses will be taxed on profits for the tax year and not, as now, the profits for the accounting year ending in a tax year. For the tax year 2024 to 2025 and future years where accounting years are different from the tax year end, the taxable profits will be worked out by apportioning the profits for the two accounting periods that straddle the tax year.

The tax year 2023 to 2024 is a transition year in which self-employed businesses will move to the new way of calculating taxable profits for the tax year.

If you’d like to know more about this change, give us a call and we’ll be happy to help: 01892 513515