Sole traders and partnerships could be about to see significant changes to the ways in which they are taxed.
The Government plans to reform the basis period rules in a bid to simplify how unincorporated businesses allocate trading profits to tax years for inclusion on their self-assessment returns.
It aims to streamline the system before Making Tax Digital for income tax self-assessment (MTD for ITSA) becomes mandatory from April 2023 for these small businesses and align the way self-employed income is taxed with other forms of income, such as property income.
Such businesses are currently taxed on the profits of their accounting period, whereas under the new proposals they would be taxed on the profits arising in the tax year.
What does this mean for your business?