Basis period reform
The Government released a consultation earlier in the year on the tax rules that govern the timing of when income is assessed on self-employed individuals and partners within the tax year.
It has been confirmed that from April 2024 basis periods will be aligned with the standard tax year, with 2023/24 being a transitional year. During 2023/24 existing overlap relief can be used and any additional profits realised during the realignment period can be spread over a five-year period for tax purposes.
This measure was previously planned to come in from April 2023, with 2022/23 being the transitional year however the Government recently announced a 12-month delay.
The draft legislation was published on 20 July 2021 and more information can be found here.
It was confirmed in the autumn Budget that some revisions to the draft legislation originally published would be made, including provisions to reduce the impact of the transitional profits on allowances and benefits.
Making Tax Digital
Following on from the delay in basis period reform, Making Tax Digital for income tax has also been delayed.
The new dates for implementation for taxpayers with business or property income over £10,000 are April 2024 for sole traders and landlords, April 2025 for general partnerships and other more complex partnerships with a later date yet to be confirmed.
Businesses with income under £10,000 can voluntarily sign up from April 2024.