With Ammu Chartered Accountants
Attention self-employed: get ready for a longer tax year.
The government has changed the taxation system for self-employed individuals and partners in partnerships, requiring them to pay tax on their trading profits earned during the tax year instead of the accounting year.
The tax year 2023/24 will act as a transitional year whereby the old basis period rules will be abolished and replaced with the new tax year basis.
What is the new Tax System
Taking the 30 April year end as an example, in 2023/24 the default position will be that your taxable profits will be as follows:
1. the “normal” calculation of profits for the accounting year ending 30 April 2023, plus
2. The ‘transitional part’ which includes your profits from 1 May 2023 to 5 April 2024
To overcome the tax liability that will occur from the transitional changes, there are two measures to reduce the impact;
1. Any overlap relief from prior tax years can be deducted from profits; and
2. The ‘transitional part’ profits can be spread over a period of up to five tax years
It is worth noting that the following four tax years, the personal allowance and higher rate threshold are frozen. While this change may sound daunting, it presents planning opportunities, such as making a larger pension contribution.
Talk to Amma Accounting to ensure you’re prepared for the implications and ready for a higher tax bill come January 2025.
Ammu Accounting has news to share too! We are continuing to grow by expanding across the city to Giffnock – situated on the southside between our west end office and our Ayr office. We’re thrilled to welcome the team and clients from the highly respected MCC Accountants to Ammu Accounting. We strongly believe that by bringing together the best of both firms and with our broad range of services and highly skilled professionals we can offer you a tailored service that will greatly benefit you and your finances.
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