Under proposals to simplify the taxation of profits for the self-employed, HM Treasury has announced fresh proposals to tax the self-employed on the profits they make in the 12 months to the end of the tax year rather than the present system of taxing them on the profits in their chosen year end.
The Government has already announced plans to mandate Making Tax Digital for unincorporated businesses and landlords with an annual turnover over £10,000 from April 2023.
So what will this mean for the self-employed business
At present the self-employed (including partnerships) have a choice over their year end and can with careful planning defer the payment of tax by carefully choosing a year end. If the proposals come in this flexibility and ability for planning will be removed.
If you are a seasonal business this may cause you an additional burden and with Making Tax Digital coming in means you need to plan now to look at your systems and your year end. It could lead to increased costs as people will need to work with their advisors during any transition period and possibly change their systems to cope with new reporting requirement.
Jill Evenden says “Whilst I can see the benefits of this in some ways (overlap profit calculations are often forgotten by some advisors and self-employed people who do their own tax returns) its just another step for HM Treasury to diminish the flexibility of the self-employed person. We are already going to see Making Tax Digital reforms coming in, and if we see these proposals coming in too, its another change for the self- employed. Our Masterclasses are here to help the self-employed navigate these and other issues. We will be discussing tax as we go along, and by joining us businesses
will get my advice on this and other topics so it all becomes less of a burden. We are advocates for the self-employed and SME's who are definitely going to need more resilience as we travel this bumpy road as taxation rules change”