How income tax payable by unincorporated businesses, such as sole traders or partnerships, is calculated changed under new rules brought in by HMRC in April (2023). The tax body is worried that many businesses still seem to have not heeded its warnings about how it will impact them.
Put simply, some could pay much more in tax and be burdened with extra unnecessary admin too. The problem does not just affect practices, but locums too if they operate in a way that is caught by the new rules.
The change to what is known as the ‘basis period’ rules will make little or no difference to the many businesses that already have an April 5 or March 31 year end. As Emma Rawson, a technical officer at the Association of Taxation Technicians, points out: ‘For those with accounting years that do not align with the tax year, the impact will be significant.’