Self Assessment changes for 2024

As another year comes to a close, individuals conducting Self Assessments once again need to take stock of all the new changes coming for the next 12 months. The 2024 Self Assessment changes will usher in significant alterations to the filing and submission process, impacting how you fulfil your tax obligations. 

Whatever your circumstances, if you’re eligible for Self Assessment, it’s vitally important to keep track of these changes to avoid any nasty penalties. 

With this in mind, let’s dive into the Self Assessment changes scheduled for 2024, providing you with a comprehensive understanding of what to expect in the upcoming tax year. We'll explore the reasons behind these changes, the potential benefits they offer, and the challenges they may pose. 

Changes from the 6th April 2024

Starting from 6 April 2024, HMRC are making a series of changes that seek to simplify and modernise the Self Assessment tax system. These changes mark a substantial shift in how individuals, particularly self-employed sole traders and partnerships, will report their income to HMRC.

Let’s explore some of the biggest changes to Self Assessment in 2024:

1. Changes to income thresholds

One of the most noteworthy changes to Self Assessment in 2024 is the adjustment of income thresholds that determine who needs to submit a Self Assessment tax return. 

For individuals in employment whose income is collected through PAYE, the threshold for mandatory Self Assessment filing has increased from £100,000 to £150,000 starting in the 2023-2024 tax year.

So, if you fall into this category and earn less than £150,000, you won't need to submit a Self Assessment form, given you don't meet specific criteria. 

This criteria includes: 

• If you’re self-employed with a gross income over £1,000.

• If you’re a partner in a business partnership.

• If you’re liable for the High-Income Child Benefit Charge.

• If you’re receiving any untaxed income.

If you do meet this criteria, the obligation to file a Self Assessment return remains, irrespective of income.

It's important to note that these changes may lead to thousands paying more tax, as the previous threshold for the additional tax rate of 45 per cent was £150,000. Now, those earning over £125,140 will be subject to this higher tax rate.

2. Digital record-keeping

With the new Self Assessment changes, all financial records must be kept in a digital format. This could entail using bank feeds, electronic invoices, or uploading photos of paper records. 

It's essential to ensure that these digital records are maintained for 5 years and 10 months following the end of the tax year, unless HMRC specifies otherwise.

3. Basis Period Reform (BPR)

Additionally, starting from April 2024, the basis period reform (BPR) rules come into play. This reform is set to affect self-employed sole traders and partnerships, particularly those whose accounting period does not end on specific dates between 31 March and 5 April. 

Under BPR, all self-employment and partnership profits will be taxed on a tax year basis, starting from the 2024-2025 tax year.

For businesses that do not have an accounting period ending on the mentioned dates, it might be necessary to consider changing the accounting period to align with the tax year for a smoother transition. If unused overlap relief exists, it should be claimed in the 2023-2024 tax year to avoid losing it. Overlap relief can reduce the amount of taxable profits during the transitional period.

To navigate all of these reforms effectively, individuals and businesses are encouraged to seek professional advice and stay informed about the specific implications of these changes on their financial responsibilities.

How will this affect my income tax?

The self-assessment changes taking effect from 6th April 2024 is likely to have an impact on your income tax. First, the income threshold for self-assessment will increase from £100,000 to £150,000, potentially exempting more individuals from filing returns. 

How do I need to prepare for the Self Assessment changes?

With significant changes to the Self Assessment system on the horizon in 2024, preparation is key to ensure a smooth transition and compliance with the new regulations. 

Here's what you need to do to prepare for the changes:

• Stay Informed: Keep yourself updated with the latest information from HMRC and other relevant sources. As the changes draw nearer, HMRC will likely provide detailed guidelines and resources to help you understand and adapt to the new system.

• Assess Your Eligibility: Review your income to determine whether you fall within the new income threshold. If your income is below £150,000 and you don't meet any of the specified criteria, you may no longer need to file a Self Assessment return. 

  • Understanding your status is crucial for avoiding unnecessary compliance burdens.

• Consult a Tax Advisor: The Self Assessment changes for 2024 are complex, and their impact on your specific financial situation may vary. Seeking guidance from a tax advisor or accountant can be invaluable in understanding how the changes will affect you personally and how to best prepare.

• Plan for Unused Overlap Relief: If you anticipate having unused overlap relief, be prepared to claim it for the 2023/24 tax year to avoid losing this valuable tax relief.

• Consider Changing Your Accounting Period: If your accounting period doesn't align with the tax year and you find it challenging to adapt to the new reporting requirements, consider changing your accounting period.

Evaluate the conditions for making this change, which may vary if done in the 2022/23 or 2023/24 tax year.

Remember that the upcoming Self Assessment changes are designed to enhance the efficiency and accuracy of the filing and submission process. Proactive preparation will help you navigate these changes effectively, reducing the risk of errors and ensuring you stay compliant.

Make Self Assessment easy with QuickBooks

With Quickbooks’ intuitive Self Assessment accounting software, you can navigate the upcoming changes in the Self Assessment system with ease. With real-time access to your financial data, including transactions, invoices, and expenses, you'll always be well-prepared when it's time to submit your tax returns.

Our intuitive software simplifies the process by supporting you with key calculations, freeing up more of your time to concentrate on what matters most: your business. 

Furthermore, Quickbooks uses cutting-edge AI technology to go the extra mile in assisting you with tax optimisation. It meticulously monitors every business expense and benchmarks your expense categories against similar businesses, ensuring you know where you stand. 

Should you ever need assistance, our acclaimed experts are at your service via free live chat, seven days a week. In Quickbooks, you'll have a trusted partner on your journey to a hassle-free and efficient Self Assessment process.

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