Change and opportunity: How will the basis period reform impact you?

With only a month to go before the Basis Period Reform comes into full effect, those receiving accounting services and tax advice should already know what to expect from the upcoming changes.

However, those who are unrepresented may still be in the dark and run the risk of a surprise tax bill landing on their doorstep.

Laura Dickson covers the basics of the upcoming Basis Period Reform, HMRC’s letter and the value of professional services to sole traders and partnerships.

Last month you might have been one of the recipients of HMRC’s nudge letter. Over 100,000 of these letters were sent to unrepresented sole traders and partnerships whose accounting period may fall outside of 31^st March – 5^th April.

The letter is not only a reminder of the upcoming Basis Period Reform changes, but also of the importance of discussing tax planning with your advisors.

So, what does the upcoming basis period reform mean for you, why did HMRC get in touch and why should you consider contacting your advisors about it?

A recap of the basis period reform

 The Basis Period reform will align every self-employed and partnership’s accounting period. From the 5^th April 2024, the universal accounting period will be between 31^st March and 5^th April.

Those who have differing accounting periods may need to pay additional tax on ‘transitional’ profits from next month. There is help at hand though, in the form of overlap relief.

Additional profits generated in this transitional year could be reduced. We’ve covered the ins and outs of basis period reform, if you wanted a more detailed delve into the subject matter, here.

Why did HMRC send me a letter?

HMRC’s letter entitled ‘changes to reporting income from self-employment and partnerships’ has been distributed to those who are unrepresented and could be impacted by the upcoming changes.

The letter has been issued as a reminder to those who could be impacted by the changes, and to signpost the relief and additional support measures which are one offer.

As with any reform, there is a lot of change to consider. Whether that be how much transition period profit was generated this year and the subsequent tax calculations, or transition reliefs and support on offer.

While HMRC’s letter does sign post the support measures on offer, having a conversation with your advisors who can explain things in plain English and tailor their advice to your specific situation, can add real value.

Spotting opportunities amidst the change

The conversation shouldn’t just stop there. Keeping on top of changes and remaining compliant is only one aspect of your advisor’s role. Having a conversation on the wider happenings of your business or earnings is a great way of staying ahead in your tax planning and spotting new opportunities too.

Whether it be wider reliefs on offer that you may not have been aware of, pension planning support, IHT planning for the future, protecting and securing wealth through trusts or restructuring a business- your advisor will be able to highlight planning opportunities tailored to you.

Make the most of your tax planning opportunities

Making the most of the tax planning opportunities available to you can be as simple as a conversation with a trusted accountant or tax professional.

Our experts can support you with any upcoming legislation changes and reforms, as well as offering advice tailored to your personal and business goals and circumstances.

Get in touch to find out how we can help you.