Basis period reform
03 Nov 2021
To pave the way for the introduction of MTD for ITSA, the basis period rules are to be reformed for self-employed traders.
Currently, the profits that are assessed for a tax year are those for the accounting period ending in that tax year. For example, if you prepare accounts to 31 December, the profits for the year to 31 December 2021 are assessed in 2021/22.
However, this is all to change and the profits that will be assessed in the tax year will be those for the tax year (i.e., profits from 6 April to 5 April or, where preferred, 1 April to 31 March). As with MTD for ITSA, these reforms have been delayed by one year. A tax year basis period will apply from 6 April 2024, with 2023/24 being a transitional year.
If you do not currently prepare accounts to 31 March (or 5 April), you may want to consider changing your accounting date. We can explain how the rules will work, and how the transitional year changes will affect you.