Well, it has been an interesting couple of weeks. I should have been at a Tax Conference in Cambridge, but it was overtaken by the events of the last few days and cancelled. I am told that I will get my money refunded but I will still be considerably out of pocket.
However, nothing is black or white. Although I have train and plane fares that I cannot recover, I do get 6 extra days and I have already put some of these to good use to get a few things caught up. So, every cloud has a silver lining.
It will be interesting to watch life getting back to normal. This has been an un-natural lull in political dueling as well as all those annoying marketing emails. I am sure you would agree that our emails are not annoying.
There is no shortage of things to be done in my life, our business and in the country as a whole. So, time to get the gloves off and get stuck in.
Normally after my regular autumn tax conference I come back north, and the self-assessment season is getting into full swing. Do you still find it confusing? Just wait until 2024.
If you have combined self-employment income (not profits) plus gross rental income which together exceed £10,000 then you will be required to report a summary of your activities quarterly, and that has to be submitted online from software that is compatible with HMRC’s own systems. The first report will be uploaded for the 3 months to the end of June 2024. You will still need to prepare accounts for each enterprise but these will be filed in the same way after the end of the tax year but then there will be another filing equivalent to your current self-assessment tax return.
On top of that, the profits to be reported will in all cases have to coincide with the tax year. You can prepare accounts to a different date but in that case you will have to apportion the profits from 2 sets of accounts to get to the profits to be reported.
Oh yes, I left the best bit till last. If you prepare accounts to a date other than 31 March or 5 April then the transition year will be 2023/24 and that is the tax year that will be starting in a little over 6 months. In that tax year you will be assessed for the whole of your latest accounting period plus the gap between that accounting period and 5 April 2024. So, if you have a 30 April year end you will be taxed on 23 months profits, 31 May on 22 months profits, 30 June on 21 months profits and so on. The extra will be spread over the subsequent years but there is still going to be an acceleration of your tax.
This will not affect partnerships or companies yet. Your turn will come.
But if you are a sole trader or a landlord and your gross takings exceed £10000, what should you be doing? Whatever you do, don’t panic. We will be there to guide and help you through the maze.
This will all run smoothly if you get the fundamentals right and that is the bookkeeping. If that’s properly organized, not only will you breeze through quarterly reporting and the rest, but you will have better records and preparing your year-end accounts will much be easier.
Let me give you an example of what you could do. We use most of the common online accounting packages, although the main ones are QuickBooks Online and Xero. You can set up bank feeds to automatically download all your bank transactions. You can scan all your invoices and it is a quick job to attach these to your bank transactions, so you never need to hunt for bits of paper again. You can get more complicated and maintain sales and purchase ledgers if that suits you better.
Fundamentally, if you do this, the rest will be a doddle.
The safety net is that if you give us all your paperwork, we can do all this for you.
I think the next couple of years might appear daunting for all of us, but we will all get through it. Once we have all embraced the new way of reporting to HMRC and have got used to the demands and quirks of the new systems, it will all be as clear as self-assessment has become since its introduction 26 years ago.
Of course, that assumes that nothing is postponed again. It has already slipped back a year, and there is no certainty that it will not slip back again. I think it is very unlikely it will be cancelled but some aspects could be. There is some speculation around that the tax year basis of profit assessment could be postponed or even dropped altogether. However, whatever the speculation, my money is on everything now going ahead, but as Helen would tell you I have been known to be wrong, frequently apparently.
Time to grasp that nettle!
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Alan E Long
The Long Partnership