Unless you are self-employed with a business year end date different to 31st March / 5th April, you may not be aware that some self-employed businesses year ends do not align with the end of the Tax year, this means that an individual is taxed on the profits of the accounts date falling in the tax year, rather than profits arising within the tax year.
But that’s all going to change.
The new rules will mean that employment income, self-employed profits, property income, savings and investment income will then all be aligned with the yearend of 5th April.
The changes will come into force by 2023, perfectly timed for the Making Tax Digital rules to come into play. The new changes will simplify the system and reduce the amount of errors within personal Tax returns.
For many clients, these new rules will not cause any effect, as they will have year ends of 31st March / 5th April and therefore their yearend already align with the Tax year, however there are many sole trader businesses and partnerships which it will.
How will this benefit business owners?
For those without 31st March / 5th April year ends, there are multiple benefits of this change:
- Limits errors and mistakes on self-employed tax returns.
- Less time spent completing returns allowing more time to grow the business and create jobs.
- Basis period will no longer apply and therefore less likely to be double taxed at cessation if you forget to claim the relief.
- Simpler tax treatment for those completing their own returns.
Chippendale and Clark will start to plan for our client’s year ends this will affect and act accordingly. If you are not a client of Chippendale and Clark and believe that this will affect you, please do not hesitate to contact the office on 01249 465 435 or 01793 378 586.
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