Private Practice Update: What is Basis Period Reform?

Basis period reform (or BPR) is a new regulation that stipulates that all self-employed individuals and partnerships will have to report their business tax information to HMRC on a tax-year basis from now on.

This means that regardless of their accounting period, their business profits, expenses and subsequent tax calculations will run from 6 April in one year to 5 April in the following year.

The 2023/24 tax year is classed as a ‘transition’ period which allowed businesses to adjust to the new tax reporting rules before they came into effect for 2024/25.

Some businesses might need to report their 2023/24 tax return for more than a 12-month period in order to move to the new set up – this could create larger tax bills in the short term or have an effect on business cash flow. In order to support such cases, businesses will be able to spread payments for the tax bill proportionally across the next five years.

From the 2024/2025 tax year, businesses can still continue to use different accounting dates but will need to calculate the portion of taxable profits applicable to the tax year in question.

The reasoning behind the basis period reform is to bring businesses in line as part of the introduction of Making Tax Digital which requires businesses and individuals to keep digital records and submit quarterly tax updates.

If your business is impacted by basis period reform, a specialist medical accountant could work with you to assess whether a change of accounting date is appropriate,  consider any cash flow implications, and make a plan for preparing your tax returns in good time. If you have any questions, please do speak with your accountant who will be happy to help.

For more information on how we can make your practice and personal accounts easier to manage, please telephone or email our office team:

01732 365351

doctorsclub@sandisonlang.com

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