Important changes for the self-employed
Post by Mearns & Company in News
It was a busy summer for government announcements for the self-employed.
As well as details of the fifth and final Self-Employed Income Support Grant (closed as of the end of September), additional changes to taxation – actual and potential – came out which are worth bearing in mind for the future.
Guidance was issued on the new extended loss carry back provisions. For trade losses made in 2020/21 and 2021/22 tax years only, unrelieved losses can be carried back and set against profits of the same trade for three years before the tax year of the loss. The previous maximum period was one year.
Tax basis for self-employed
HMRC launched a consultation on changing the basis of self-employed taxation. At present your tax liability is generally based on your profits in the 12 months ending on your accounting date, e.g. if that date was 30 June, then your 2021/22 assessment would use your profits for the year to 30 June 2021. From 2023/24, HMRC wants to tax actual profits made in the tax year. The result could be a large tax bill covering the 2022/23 transitional year – for profits from 30 June 2021 to 5 April 2023 for a 30 June accounting date.
The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.