Looks like you have even more changes to look forward to in the 2024\/2025 tax year \ud83e\udd72<\/p>\n\n\n\n
HMRC has confirmed that although Making Tax Digital<\/a> (MTD) will no longer be launching in 2024 for everyone, the change in the basis period that was suggested will still be moving forward from 6th April 2024. <\/p>\n\n\n\n This change will mainly affect self-employed<\/a> people.<\/p>\n\n\n\n So, what is it and what does the basis period reform mean for you? Let\u2019s try and demystify HMRC\u2019s mysterious ways.<\/p>\n\n\n<\/div> \n\n Our Making Tax Digital (MTD) software<\/strong> for landlords and sole-traders with built-in accountant support is now live. First month for free!<\/strong> To recap, MTD is the government\u2019s plan to switch UK personal taxes over from paper to completely digital.<\/p>\n\n\n\n It was supposed to go live several times, but the last official time was for 2024. It\u2019s now been pushed again<\/a>.<\/p>\n\n\n\n Right now, MTD is still only for VAT<\/a>-registered businesses. Eventually, it\u2019ll be for everyone who needs to file a Self Assessment tax return or pay VAT. <\/p>\n\n\n\n Businesses, landlords and self-employed people earning:<\/p>\n\n\n\n No word yet from HMRC on what happens to those earning less than \u00a330,000, so we\u2019ll have to wait and see what they say. <\/p>\n\n\n\n Usually, you\u2019ll draw up your annual accounts, which is just a fancy way of saying profits and tax, to the same date every year. It\u2019s called the accounting date. Previously, profits were calculated for the year up to the accounting date. This could have been any 12-month period of your choosing, called the basis period<\/a>. <\/p>\n\n\n\n There are lots of rules when it comes to a basis period. In some cases, you\u2019re taxed twice on profits – yikes. But luckily, you get something called overlap relief<\/a>, usually when the business (AKA you) stops trading (AKA working). <\/p>\n\n\n\n The basis period reform<\/em> means that now profit and taxes will be reported on a \u201ctax year basis\u201d, going live from the 2024\/25 tax year.<\/p>\n\n\n\n The basis period reform means that self-employed people will have to report profits and tax to HMRC on a tax year basis and not based on accounting periods of their choosing like in previous years. <\/p>\n\n\n\n So, in short, if your accounting period is not somewhere between 31st March and 5th April already, you\u2019ll need to change it to line up with the tax year ending on 5th April. Accounting periods that end on 31st March, 1st April, 2nd April, 3rd April and 4th April automatically fall under the correct criteria and won\u2019t need to be changed. The 5th April date is now in line with the future MTD dates as well. <\/p>\n\n\n<\/div> \n\n Key dates in the current <\/span>2025\/26 tax year \ud83d\udc47<\/b><\/p>\n This means that your profits now need to be reviewed and taxed in the tax year you earned them. So when you fill out your Self Assessment, you need to make sure you\u2019re filling it out for the tax year and not your previous accounting period dates\ud83d\udcdd <\/p>\n\n\n<\/div> \n\n As we mentioned above, you\u2019re entitled to overlap relief<\/strong> when you\u2019re taxed more than you should be due to the overlapping of accounting periods.<\/p>\n <\/p>\n Basically, you end up reporting repeated profits, which leads to you paying tax twice on those same profits. It\u2019s most likely to crop up as an issue if you\u2019re not using 5th April as the end of your accounting period. HMRC know this isn\u2019t right, thankfully, and introduced overlap relief.<\/p>\n\n <\/div>\n<\/div> \n\n So now that you have to switch to this date regardless of whether you\u2019ve already paid tax on certain profits, you might double up on tax payments – yikes. Luckily, you\u2019re still entitled to your overlap relief.<\/p>\n\n\n\n However, before, overlap relief was given when you stopped trading. But this is changing too! The new basis period reform rules state that you must use all unused overlap relief in the 2023\/24 tax year or you\u2019ll lose it and won\u2019t be able to use it after April 2024. <\/p>\n\n\n\n Mostly self-employed people. But it also includes partners in trading partnerships, or unincorporated businesses<\/a> with trading income (like trading trusts, estates, etc). <\/p>\n\n\n\n Specifically, within these categories, you\u2019ll be affected if your current accounting period does not end between 31st March and 5th April. <\/p>\n\n\n\n If it does, you\u2019re in the clear. HMRC will treat you as if you\u2019re already following the new rules. You can just continue business as usual when preparing your accounts\ud83d\ude05<\/p>\n\n\n<\/div> \n\n Pro tip\ud83d\udca1:<\/strong>\u00a0if you started being self-employed in 2022\/23 or 2023\/24, pick a date between 31st March and 5th April to end your accounting period. Then you\u2019re following the rules and it\u2019ll make filing your tax return that much easier\ud83d\udcaa<\/p>\n\n <\/div>\n<\/div> \n\n You\u2019ll still need to file your tax return as usual, but your figures will look a little different\ud83d\ude44<\/p>\n\n\n\n Not much else to do really, other than changing the dates of your accounting period and making sure your profits and tax are correct – a small feat and nothing that should negatively impact you, according to HMRC. Ha! <\/p>\n\n\n\n There could also be some maths involved – sob\ud83d\ude30<\/p>\n\n\n\n Remember, as someone who is self-employed, you need to file a Self Assessment tax return. It\u2019s a different process as a business and you might also need to pay Corporation Tax<\/a> and file a Company Tax Return<\/a>.<\/p>\n\n\n<\/div> \n\n
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Wait, what happened with MTD again?<\/h2>\n\n\n\n
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What is the basis period?<\/h2>\n\n\n\n
What is the basis period reform? <\/h2>\n\n\n\n
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\n Deadline<\/b><\/td>\n Date<\/b><\/td>\n Year<\/b><\/td>\n<\/tr>\n \n Tax year starts<\/span><\/td>\n 6th April<\/span><\/td>\n 2025<\/span><\/td>\n<\/tr>\n \n Tax year ends<\/span><\/td>\n 5th April<\/span><\/td>\n 2026<\/span><\/td>\n<\/tr>\n \n Register for self assessment<\/span><\/td>\n 5th October<\/span><\/td>\n 2026<\/span><\/td>\n<\/tr>\n \n Pay tax bill by PAYE salary<\/span><\/td>\n 30th December<\/span><\/td>\n 2026<\/span><\/td>\n<\/tr>\n \n Self assessment deadline<\/span><\/td>\n 31st January<\/span><\/td>\n 2027<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n <\/div>\n<\/div> \n\n Who does the basis period reform affect?<\/h2>\n\n\n\n
What do you need to do next?<\/h2>\n\n\n\n