Following government proposals to shift the date when certain businesses disclose their income, over half a million partners and sole traders may face higher tax bills than expected next year.
The Institute of Chartered Accountants in England and Wales (ICAEW) states that the proposals would raise billions of pounds for the Treasury years in advance of when it otherwise would have received the funds. It would also see a decrease in the amount of operating capital available to partners and sole traders for up to five years.
A consultation and draft legislation published last month revealed plans to alter the 12-month period partners and sole traders use to calculate profits to bring everyone in line with either 31 March or the end of the tax year on 5 April.
These changes would mean tax liability, which businesses and their partners are currently able to defer by having a later date for the end of their accounting year, will be brought forward.
Based on tax returns for 2019/20, the measure is expected to affect almost 250,000 partners and 280,000 sole traders.
If you would like to discuss this article in the context of your own business, get in touch with our tax team on 01788 539000 or 0116 261 0061.
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