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BIG CHANGE FOR SELF EMPLOYED TRADERS: MTD Forces Change From Current Year Basis To Tax Year Basis

From 2022/23 tax year, all Self-Employed Traders must now file to the same quarterly deadline under MTD for Income Tax Self-Assessment. Many authors argued this is major policy change since the introduction of self-assessment in 1995/96 when prior year basis was ditched.

This change will only affect self-employed traders who do not draw up annual accounts to 31 March or 5 April each year and those that are in the early years of trade. This accounts for about 7% of Self-Employed traders and 33% trading partnerships which include large law firms, doctors, dentists, etc.

They are now required to change from current year basis (i.e. reporting incomes and expenses for the 12 months to the accounting date that ends in that tax year) to tax year basis (i.e. reporting incomes and expenses that arise precisely in the tax year). This will apply to both trading and property businesses.

Under this new tax-year basis, the self-employed taxpayers will file MTD reports for all their sources of income by the same date each quarter, with a possible deviation for VAT if their VAT returns are not in the stagger one group (March, June, September and December quarter ends).

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