Simplified tax reporting for small business and self-employed

Tax

 

The Government has announced reforms to the tax system that will make it easier for small businesses and self-employed individuals to fill out their returns. 

 

The changes will come into force by 2023, will mean businesses will be taxed on profits arising in a tax year, rather than profits of accounts ending in the tax year.

 

It should help them spend less time filing their taxes – aligning the way self-employed profits are taxed with other forms of income, such as property and investment income.

 

Currently, businesses that draw up their accounts to a different date to the end of the tax year (5 April) pay for their first tax year to its end and then on the basis of their full accounting year for subsequent years, meaning profits are taxed twice, for which they can apply for relief.

 

In line with the Tax Policy Making framework, HMRC have published draft legislation for inclusion in Finance Bill 2021–22. This allows for technical consultation and provides taxpayers with predictability over future tax policy changes. The consultations on the draft legislation will run until 31 August 2021.

 

Critics say that changes would see the self-employed pay extra as the changes are brought about, with about a fifth of self-employed people expected to be hit by the extra one-off costs involved in familiarising themselves with the new system and updating software.

 

Please go to https://www.gov.uk/government/news/government-announces-simplified-tax-reporting-for-self-employed-and-small-businesses for further details.  

 

 

 

Blog post uploaded 21 July 2021