Changes To Accounting Dates For Some Self-Employed Individuals

To make the 01 April 2026 ‘MTD for income tax’ changes as smooth as possible, HMRC are requiring sole traders who have an accounting year not aligning with the tax year to file an extended period tax return now. The following changes only affect landlords, partnerships and sole traders/self-employed individuals with a turnover greater than £10,000.

Presently, unincorporated (non-limited companies) are free to choose their accounting year end date. The profits from this period are taxed according to the tax year which the accounting year-end falls in. For example, a business with a year-end of 31 October 2021 would be taxed on profits in the tax year of 06 April 2021 to 05 April 2022, with the tax still payable by 31 January 2023.

HMRC understands that during the 2023/24 tax year, some will need to unexpectedly pay an increased amount of tax as the accounting year will be longer than 12 months. Where taxable profits exceed the current accounting year’s profits, the excess profits can be spread over 5 years, if necessary however, they cannot be deferred.

In this case, we will be advising affected clients to consider changing their account year-end to 31 March or even 05 April to bring it inline with the end of the tax year.

Please contact LR Accounting for further details and advice.