Earlier this year, HMRC announced a reform of Tax Basis Periods. In basic terms, basis period is the duration which your business financial year runs, for example from 6 April – 5 April each year.
The change is straightforward in principle – as from the 2024/25 tax year (when Making Tax Digital starts), all affected businesses will need to use the tax year as their basis period.
Most sole traders already use the tax year as their accounting and basis period – however those which have different periods (such as 1 January – 31 December) will need to transition to the new year during 2023/24 at the latest, ready to start on the new financial year in 2024/25.
The tax year traditionally runs from 6 April to 5 April the following year, however Basis Reform does allow 1 April – 31 March as an alternative, or periods between 31 March and 5 April as the end date.
MalgraBooks currently operates with all members running to the current tax year, and where any business doesn’t work to this period when they join, we’ll support to move the accounting periods to ensure compliance for the introduction of MTD and Tax Basis Reform.
If you don’t use MalgraBooks, please contact your accountant for advice.