Switch to tax year basis to start in 2024

Despite Making Tax Digital for income tax self-assessment (MTD for ITSA) being delayed until at least 2024, the switch to tax year basis will still go ahead from 2024/25 onwards.

This means self-assessment customers will be subject to income tax on their profits in the tax year, regardless of their accounting period. According to HMRC, this will make the taxpayer's estimated liability more relevant.

Previously, the basis period reform was set to begin at the same time as MTD for ITSA. However, as the legislation has already gone through, the timetable for introducing it will remain the same.

HMRC claims this will give businesses and tax agents more time to adjust to the changes before MTD for ITSA rules come into effect.

Following feedback, the Government will allow unincorporated businesses who are unable to align their accounting period with the tax year to update their tax return figures when they submit their next return..

In an update to the Chartered Institute of Taxation, HMRC said:

"This option will provide the best balance between targeted admin burden savings and avoiding adding significant new complexity to the tax system."

Businesses looking to change accounting dates or use overlap relief will need to wait until HMRC provides further information in the coming months.

Talk to us about your self-assessment returns.