Basis Periods To Be Abolished Due To Making Tax Digital

If your business is unincorporated, you may see a bumper tax bill in 2022/23 as your accounts are adjusted to fit the tax year from the 6th of April 2023, ready for Making Tax Digital ...

The Finance Bill 2022 will abolish 'basis periods' for businesses that usually pay Income Tax on profits they calculate on a current year basis. This will change to 'tax year basis' for Making Tax Digital.

"Losses will be those arising in the tax year!"

When self-assessment was first introduced in 1995/96, income tax from an unincorporated business was changed from the 'prior year basis' to the current year instead. MTD has changed all this.

Making Tax Digital for Income Tax starts in April 2023, and the reporting of your accounting data will be aligned with the tax year. Any accounting year-end between the 31st of March and the 4th of April will be adjusted to the 5th of April instead.

This means that any income or expenditure after the end of the new accounting period will fall into the next tax year. This applies to both trading and property businesses.

"The majority of unincorporated businesses will not be affected!"

HMRC want to simplify the processes needed to implement Making Tax Digital for Income Tax, so this change will remove the future need for up to 13 MTD filings and multiple VAT filings too.

If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.