Taxation for the self-employed has seen many changes over the last few months, from the ending of the Self Employment Income Support Scheme (SEISS) to the new extended “loss carry back” provisions. HMRC has even launched a consultation to change the tax basis for the self-employed, which could heavily impact income payments for those registered as self-employed in the tax year 2022/23.
With so many changes that affect the self-employed it is crucial to ensure that, if you work for yourself and must complete your own tax assessment, you understand how these new and proposed changes will impact your tax payments going forward.
Reduced support as we emerge from the pandemic
In September, the Self Employment Income Support Scheme (SEISS) ended, with the last applications for the fifth and final grant being taken on 30th September.
The support scheme was introduced by the government back in September 2020, to help support the self-employed throughout the multiple lockdowns. However, the termination of this scheme means that there is no reduced financial assistance for the self-employed
Extended “loss carry back”
In the Finance Act 2021, guidance was issued on the new extended loss carry back provisions for trading losses made in 2020/21 and 2021/22. With these changes, your business can carry back unrelieved losses and set them against your profits from the same trade for three years before the tax year of the loss.
Before this, these unrelieved losses could only be carried back for a maximum period of one year – and no changes have been made to the current carry back of trade losses.
However, the amount of loss that can be carried back with the extended relief is capped at £2,000,000 of trade losses for the relevant account periods that ended in the tax year 2020/21, with a separate cap of £2,000,000 for the tax year 2021/22.
All extended “loss carry back” claims must be made in a return unless the claim is below £200,000, which can then be made outside of a return.
Changes to the basis of self-employed taxations
HMRC is consulting on changes to income taxation, which could have a huge impact on the tax liability of those registered as self-employed.
Tax liability is currently measured on your profits in the 12 months prior to your accounting date. For example, if your accounting date was 30th June, your 2021/22 assessment would be based on your profits for the 12 months leading up to 30th June 2021.
However, from 2023/24, HMRC is looking to tax actual profits made within the tax year.
The proposed changes could result in a large tax bill to cover the costs of the 2022/23 transitional year. Therefore, if your accounting date is 30th June, you would then have to cover the profits from 30th June 2021 to 5th April 2023.
How can KLO Financial Services help?
At KLO Financial Services, we offer personal financial services to help our self-employed clients better manage their finances long term.
Are you self-employed and looking for additional support with these changes? Our personal financial advisers and financial planners in Warwick, Birmingham and London can help.
Give us a call on 01926 492406!
Any research is for information purposes only and does not constitute financial advice. The value of investments and any income from them may go down as well as up, so you may get back less than you invested. Past performance cannot be relied upon as a guide to future performance. KLO Financial Services Ltd are registered in the UK, company number 08711328. We are authorised and regulated by the Financial Conduct Authority, reference 710272.