HMRC’s New Basis Period Reform

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HMRC’s New Basis Period Reform

Aug 30, 2023

Will you need to report profits differently on your Self Assessment Tax Return?

HMRC will be changing the time frames in which sole trader and partnership businesses use to calculate their taxable profits. Previously, the self employed could report profits according to their own business accounting year end date. However, going forwards if a business accounting year end does not finish on or between 31^st March – 5^th April, in line with the UK tax year (5^th April – 6^th April) the profits will need to be reported differently on the Self Assessment tax return.

Starting from tax year 23/24, known as the transitional year, the new basis period reform will apply, meaning an affected business will need to report profit up to the UK tax year end (5^th April) regardless of when it's own business accounting year ends. For example, if your accounting year end is 31^st December, you will need to report profits from 1^st January 2023 up to 5^th April 2024.

This could mean that more than 1 year of profits may need to be reported, therefore may need to be apportioned between the 2 accounting periods (needing 2 sets of accounts). Any excess from over a years worth of profit will be known as the ‘transition profit’. This can be reduced by Overlap relief, allowing any remaining profit to be spread over future years but only up until tax year 27/28.

It's worth noting that if your business accounting year end is within 31^st March – 4^th April you may treat this profit as if it ends on 5^th April.

To conclude, in the 24/25 tax year, a businesses income tax liability will be calculated based on the profit during the tax year only, not it's own accounting period. If businesses want to continue to use their own accounting end (not the same as the UK tax year), they will need to make apportionment calculations every year when calculating the taxable profits.

Utilising a Bookkeeper to estimate and calculate profit for your self assessment tax return could save you time and money, especially if your current year end does not match the UK tax year. Get in touch to see how our bookkeeping services could help you and your business, email us at admin@booksandbusiness.co.uk

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Plans for ID verification from Companies House

by PH186232 • 22 Oct, 2024

Starting in early 2025, Companies House will begin rolling out new identity verification requirements for company directors and persons with significant control (PSCs). This means that, in the future, before filing information on the Companies House register, directors will need to prove their identity. This change is designed to reduce fraud and improve transparency. The reforms are part of the Economic Crime and Corporate Transparency Act 2023, which aims to combat fraudulent activity. As part of these reforms, accountancy firms and solicitors registered for anti-money laundering (AML) supervision will be among the first required to comply, starting in early 2025. By spring 2025, accountants and other professional service providers, who are registered for AML supervision, will be able to become authorised corporate service providers (ACSPs). This means they’ll be able to help clients verify their identities and pass that information on to Companies House. By autumn 2025, these new ID verification requirements will be mandatory for new directors and PSCs when setting up a company or making new appointments. If your business already exists, you will have a 12-month transition period until autumn 2026 to ensure your directors and PSCs comply with these requirements when your next confirmation statement is due. This is a significant change, therefore it’s important to stay ahead of these requirements to avoid any disruptions to your business.