Prep Your Practice: Key Changes Coming with the 2024 Basis Period Reform | Tax

Get Ready for a Simpler Tax Year.

Photo by Katie Harp on Unsplash

If you're a therapist running your own practice, big changes are on the horizon that will simplify how you handle your taxes. Starting in April 2024, the UK's Basis Period Reform mandates a significant shift for all sole traders—including therapists—ensuring everyone's accounting year aligns with the tax year. This change aims to reduce tax returns' complexity and simplify financial management.

Why the Change?

Traditionally, sole traders could end their financial year on any date, often leading to complicated tax calculations. Income and expenses from two different accounting periods had to be split to match the tax year, making the tax return process cumbersome and prone to errors. The new reform mandates that all sole traders align their accounting period to end on either 31 March or 5 April, syncing everyone with the tax year that runs from 6 April to 5 April the following year.

Here's a post that will walk you through some of the essential things to know…..

Lets Talk Tax - Your January Tax Checklist and An Overview of Allowable Expenses

What This Means for Your Practice

1. Simplified Tax Filing With the reform, your financial year will directly correspond with the tax year, meaning the income you report and the taxes you calculate will no longer span different accounting periods. This alignment simplifies the tax filing process, making it easier to calculate your tax liabilities.

2. Easier Financial Reviews: Aligning your financial year with the tax year allows for a more precise annual performance review. You can assess your practice's financial health directly in line with tax assessments, aiding in more accurate planning and budgeting for the future.

3. Ready for Making Tax Digital This change also sets the stage for the upcoming Making Tax Digital (MTD) for Income Tax Self Assessment, starting in April 2026. MTD will require digital record-keeping and quarterly updates to HMRC, tasks that will be much easier to manage when your accounting period aligns with the tax year.

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