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Calling all who run your own business

07.09.2021

Business

The proposed changes to ‘basis period rules’ - the period that HMRC assess you to tax on - will need careful thought.
 

Just before Parliament broke up for the summer, an announcement was made to alter how Sole Traders, Partnerships and Trusts/Estates who have trading income pay tax on their profits. 

 

It is proposed that businesses will be taxed on their profit which actually arises in a tax year - irrespective of the accounting date you prepare your accounts to.

 

The transition will take place from April 2022 – less than six months away - with full implementation from April 2023 onwards.

 

From April 2023, many individuals and non-VAT registered business will also be brought into Making Tax Digital (MTD) for Income Tax. 

 

Many professional bodies are arguing that all this is too much, too soon – especially as businesses have had to deal with the challenges of Brexit and a global pandemic over the last eighteen months.

 

If enacted, the proposals will have unexpected and unwelcome consequences for some businesses.

 

This proposed change will have little effect on those that prepare accounts to 31 March (or 5 April) but will probably have a considerable impart on everyone else.

 

Local businesses will still be recovering from the effects of the pandemic and this proposed change – which may occur in as little as six months – will place an additional financial strain and administrative burden on unincorporated businesses earlier than before.

 

No doubt we’ll know more when the Chancellor delivers his half-year budget update on 27 October 2021.

 

Contact your usual contact on 01223 810100 to find out what you need to do to prepare for MTD and whether you should consider altering the date you prepare your accounts to.

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