Planning your tax bill - self-employed need to plan for big tax bills in 2023/24

The changes to the basis of assessment of self-employed profits are scheduled to change from 6 April 2024. The new rules mean that profits (and losses) will be assessed based on the amounts arising between 6 April and 5 April instead of the profit/loss of an accounting period ending in the tax year. Profits or losses will need to be apportioned if the year end is different.

Transitional rules proposed for the previous 2023/24 tax year could result in large tax bills for some sole traders and partners, particularly those with an existing 30 April year end. The profits of year ended 30 April 2022 would be taxed in 2022/23 under the current rules with 2024/25 taxing profits arising between 6 April 2024 and 5 April 2025 under the new rules. But what about 2023/24?

The profits taxed in 2023/24 would be 23 months of profits! Those for year ended 30 April 2023 plus the period 1 May 2023 to 5 April 2024.

The transitional provisions provide for the "excess" profits to be spread over the next 5 tax years to smooth out the excessive tax bill.

Talk to your accountant now!