Self Employed Tax Return Changes

Currently self-employed individuals are taxed based on the taxable profits earned in the accounting period ending in a tax year. Hence for an individual having annual accounts prepared at the 30 June each year, the profits for year ended 30 June 2022 would be used in the  tax return 2022/23.

For tax year 2024/25 onwards, the regime changes so that profits earned in the tax year are included in the self assessment tax return. For most self employed businesses it will be make sense to change the accounting year end so that the year end is either 31 March or 5 April.

Tax year 2023/24 in the transitional year. Where an individual currently has a 30 June year end, the profits for year ended 30/06/23 will be included in the 2023/24 tax return. In addition transitional profits covering the period from 01/07/23 to 05/04/24 will also be included in the tax return computation. The transitional profits can be spread over the 5 tax years commencing 2023/24, so that 20% of the transitional profits are taxed in each tax year.

Any overlap relief will need to be claimed in the year of transition.