Do you trade as a Partnership, LLP or Sole Proprietor?
If so, you need to know about the basis period reforms proposed by HMRC. You may have heard of basis period reform, but do you know what it is and how it could affect you? This article is not intended to go into the detail, more to alert you in good time as to the possible consequences for you and your business.
Basis period reform is stated to be tax neutral – but will it really be for you?Any trader with an unincorporated business and a year-end that doesn’t coincide with the tax year will need to account for more than the usual 12 months’ worth of profits in the 2023-24 tax year. There will also be significant accounting complications for any that do not change their year-end to come in line with the tax year.
This is likely to mean additional tax payable in January 2025 for many, especially where taxable income may be increased to a level liable to tax at a higher rate than usually paid.
January 2025 seems a long way away – do I really need to think about it now?
Yes - now is definitely not too early if you want to plan for the best solution. The transition year, which has the biggest impact on tax, starts on 6 April 2023 – less than 8 months away!
Have you ever wondered if your current business structure is the best for you?If you feel you are paying more tax than you need to, or have worries about the consequences to you and your business of an unfair legal claim, you may have considered the possibility of trading as a limited company. Basis period reform, with its complexities and tax implications, may be the deciding factor that it’s time for change.
You may be wondering – where do I go from here?One thing you certainly need to do is seek professional advice, so that you are clear about how basis period reform will affect you and the impact it will have on your specific circumstances.
Your accountant or tax adviser may have already been in touch to tell you about this, but if not you should be asking them. If you feel that more specialised help is required or would like to speak to someone with many years of business restructure experience, please don’t hesitate to contact us at firstname.lastname@example.org or call 02476673160 to find out more.
Please note: This article is provided for information only and was correct as at time of writing (26/08/22). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance. No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.