ICAEW highlights five key changes for income tax self-assessment
The Institute of Chartered Accountants in England and Wales (ICAEW) has outlined five key changes for taxpayers completing their 2024/25 Income Tax Self-Assessment (ITSA) return.
Around 780,000 taxpayers filed their 2023/24 return on the final day, 31 January 2025, with nearly 33,000 doing so in the last hour, the chartered accountancy body said.
The ICAEW advised taxpayers to understand these changes to avoid last-minute difficulties.
The first change highlighted was to capital gains tax (CGT) rates. For disposals of assets (excluding residential property and carried interest) after 30 October 2024, rates have risen from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers.
The ITSA return may not automatically apply these new CGT rates, so HMRC has provided a calculator to adjust figures manually.
The CGT annual exempt amount has also dropped from £6,000 to £3,000, affecting more taxpayers, while the CGT rate on residential property disposals for higher-rate taxpayers has decreased from 28% to 24%.
The second change highlighted was the inclusion of new boxes in the 2024/25 tax return for reporting profits and losses from crypto asset disposals, previously recorded under other property, assets, and gains.
HMRC has increased its focus on crypto tax compliance, launching a campaign in August 2024 targeting taxpayers suspected of underpaying tax.
The third change highlighted was that, from 2024/25, the cash basis—calculating profits based on cash received and paid—becomes the default for most sole traders and partners, replacing the accruals basis.
Taxpayers wishing to continue using the accruals basis must now elect to do so, likely leading to wider use of the cash basis, said ICAEW.
The fourth change highlighted was that the 2024/25 tax year is the first to calculate trading profits on a tax year basis, following a transitional period in 2023/24.
For businesses with transitional profits in 2023/24, 20% of these profits will typically be taxed in 2024/25, though taxpayers can elect to accelerate taxation.
Any remaining transitional profits will be taxed in the year the business ceases.
The fifth change highlighted was that, from 6 April 2026, sole traders and landlords with combined gross sales and rents over £50,000 must comply with Making Tax Digital (MTD) for income tax, requiring digital records and quarterly updates to HMRC.
The MTD threshold will lower to £30,000 in April 2027 and £20,000 in April 2028, bringing more taxpayers into scope.
The chartered accountancy body urged taxpayers to plan ahead to ensure compliance with these updated ITSA requirements.
ICAEW technical manager for tax Stephen Relf said: 'Many taxpayers are keen to get their tax affairs in order early, and thoughts may now be turning to the completion of the 2024/25 tax return. To help, we've identified some of the areas where tax rates, rules or allowances, or the tax return itself, have changed for 2024/25. And we've provided tips for looking ahead to 2025/26.
'Don't forget that HMRC provides a range of tools and guidance to help with completing the tax return. Download HMRC's app to get your national insurance number or to check your entitlement to the state pension.
'Also, taxpayers can set up a budget payment plan with HMRC, allowing them to make weekly or monthly direct debit payments toward their next income tax self assessment bill.'
"ICAEW highlights five key changes for income tax self-assessment" was originally created and published by The Accountant, a GlobalData owned brand.
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