As the end of the tax year approaches and closes on 5 April, individuals and businesses alike have an opportunity to review their financial affairs. At this time of the year, it’s important to see what are some of the changes approaching and how they could affect you and your financial situation. Let’s have a look at some of the key areas individuals and businesses should consider when undertaking their year-end tax review.
Making Tax Digital
For years, businesses and self-employed individuals in the UK have been hearing about Making Tax Digital (MTD) and after multiple delays, the initiative is set to officially take effect from April 2026. This will change the way, tax records and how tax returns are submitted as it is being phased in for landlords and the self-employed. Once enrolled, this will involve quarterly reporting of income and expenditure for income tax purposes to HMRC via MTD- compatible software.
The reporting quarters will be to 5 July, 5 October, 5 January and 5 April, irrespective of your accounting year-end. However, taxpayers with an accounting date of 31 March will be able to operate MTD from 1 April in the first year of operating MTD. A finalisation statement (effectively a tax return) will also need to be sent after the year-end. MTD will thus greatly increase the compliance burden of any business affected. Those with qualifying income above £50,000 must enroll from 6 April 2026.
Sole Traders
Tax year 2023/24 was the transition year from the ‘current year’ basis of assessment (which charged tax on the profits of a 12-month accounting period ending in the tax year) to the tax year’ basis of assessment, which taxes the profits actually arising in the tax year. Only businesses that already had a year-end between 31 March and 5 April have been unaffected by the change.
Capital Gains Tax
The annual exempt amount (AEA) is £3,000 for 2025/26 and will be unchanged in 2026/27. Gains above this level are taxed as follows: 14% (rising to 18% from 6 April 2026) if the gains qualify for Business Asset Disposal Relief (BADR) or Investors’ Relief, up to a lifetime limit of £1 million of qualifying gains; 18% if the gains fall within any unused basic rate band; and 24% for gains above the basic rate band.
Only businesses that already had a year-end between 31 March and 5 April have been unaffected by the change. Assets transferred between married couples or civil partners do not give rise to a CGT charge; instead, the recipient takes over the CGT cost of the donor. This means that, when the asset is eventually sold by the recipient, the gain or loss will reflect the combined ownership period.
Please contact us if you need more details on the end of the year tax review or if you need any advice.
