February 2023

Although the start of MTD for ITSA has been delayed to 2026 at the earliest, the start date of the new regime for taxing the profits of unincorporated businesses on a tax year basis has not been delayed and the transition will still take effect in the tax year to 5 April 2024.

This will be a major change for those unincorporated businesses that prepare their accounts to a date other than 5 April or 31 March. From 6 April 2024 such businesses will need to compute their taxable profits from 6 April to 5 April each year, regardless of their accounting end date.

So, for a sole trader or partnership making up accounts to 31 December each year, their 2024/25 profits would be calculated as 9/12ths of their profits for the year ended 31 December 2024 plus 3/12ths of their profits for the year ended 31 December 2025.

This will invariably require the inclusion of an estimate of the profits of the later period with subsequent amendment once the final figures are known. For this reason many businesses may wish to consider changing their accounting date and we can of course advise you of the tax consequences.

More imminent is the change in the way that profits are to be taxed for the 2023/24 tax year. The upcoming tax year is scheduled to be a “transitional year” with complicated rules for calculating business profits. For many businesses the change will result in a higher tax bill and, if you can supply us with estimated figures, we can work with you to calculate the impact on your cash flow.

Please note that although MTD for ITSA will only apply to the self-employed and landlords initially, these tax year basis changes apply to all unincorporated businesses, including partnerships and LLPs, and those with profits of less than £50,000.

As mentioned before, those already preparing accounts to 31 March or 5 April are not affected.

Companies considering the acquisition of new plant and machinery need to be aware that the temporary ‘super-deduction’ of up to 130% for the cost of acquiring new plant ends on 31 March 2023.

Consequently, corporate businesses may wish to bring forward planned expenditure to take advantage of this enhanced tax deduction, utilising hire purchase agreements if funds are otherwise unavailable.

Depending on your business profits it may be beneficial to delay any planned capital expenditure until after 31 March 2023 due to the increase in corporation tax rates. If you are planning on acquiring new plant please contact us to discuss it further to ensure you achieve the highest level of tax relief.

The new tax year starts 6 April 2023, so you only have a few weeks to consider your options. Once we pass this date the majority of the tax planning options for Income Tax and Capital Gains Tax purposes will cease unless actioned before the 6 April.

Do you fall into any of these categories?

• You have or are thinking about a change in your personal status (single, married, separating, joining or dissolving a civil partnership);
• You are thinking about selling a capital asset, such as shares or a property. From 6 April 2023 the Capital Gains Tax annual exempt amount reduces from £12,300 to £6,000. The reduction also applies to trusts. The standard trust annual exemption is reducing from £6,150 to £3,000;
• You or your child’s other parent claims Child Benefit and the income of either parent is likely to exceed £50,000 for the first time during tax year 2022-23;

• Your annual income is approaching or above £100,000;
• You have not yet topped up your pension contributions for tax year 2022-23 or are considering utilising unused annual allowances from prior years;
• You are self-employed with a 31 March 2023 year-end;
• You are self-employed and are thinking about the purchase of equipment or vehicles; or
• You are the director and/or shareholder of a limited company and have not yet considered voting final dividends or bonuses for 2022-23;
• You are considering making gifts to family or friends.

If you do, and you would like to discuss ways to mitigate the tax implications, please get in contact in advance of the 6 April deadline.

The above list is not comprehensive. We specialise in helping clients with all taxes including PAYE, NIC, VAT, Corporation, Capital Gains, Income and Inheritance tax.

We are pleased to announce that Harry Woodrow has passed his final exam to become a fully qualified Accounting Technician (AAT). Harry works for Partner Craig Manser and looks forward to using his knowledge to assist clients with their accounting and tax needs.

We are delighted to have yet more exam success within the firm and congratulate Harry on all his hard work in achieving this qualification.