New self employed tax system

Reforms to the tax system that will make it easier for small businesses to fill out their returns so that profits will be taxed in the year they are earned have been announced by the government.The changes, which will come into force by 2023 will mean businesses will be taxed on profits arising in a tax year, rather than profits of accounts ending in the tax year. It might help them spend less time filing their tax returns quarterly - aligning the way self-employed profits are taxed with other forms of income, such as property and investment income.The rule change affects the self-employed, partnerships, trusts, and estates with trading income.This proposal changes the current reporting to a ‘tax year basis’ with effect from 2023 to 2024, so that a business’s profit or loss for a tax year is the profit or loss arising in the tax year itself, regardless of its accounting date.