In Budget 2021 the government announced that it was proceeding with its proposed reforms of income tax basis periods. These will affect all businesses (but not landlords) taxed to income tax unless they have already adopted an accounting date aligned to the tax year. The changes are made in part to facilitate the introduction of making tax digital (MTD) for income tax but will affect all businesses in 2023-24 whether or not they are included in the first phase of MTD from 6 April 2024.
The provisions to implement basis period reform for trading income are in FA 2022 s 7 and Sch 1. The broad effect of the rules is to remove all of the basis period rules and to simply tax businesses on the profits of the tax year. The reform does not require businesses to change accounting date but many commentators...
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