Self-employed Brits could face tax bill of £3k hidden in Budget documents

Self-employed Brits could face higher tax bills following Chancellor Rishi Sunak's autumn Budget.

Half a million could be impacted as the plan for a new way of reporting income could add thousands extra for sole traders.

Documents released last week suggest the measure will raise £1.7billion for the government over the next five years.

The government estimates there are around 528,000 businesses which could be impacted by the change.

This can even total a staggering £3,219 on average each.

It is believed the new rules will apply to anyone who doesn't already run their annual accounts to March 31 or April 5.

The self-employed report profit and loss for the tax year up to an accounting date, and for some this can be different to the tax year.

However, from 2024 all reporting will have to correspond with the tax year.

The changes will begin from 2023 when the transition to the new rules will start.

Peter Miller from the Chartered Institute of Taxation (CIT) warned this could mean higher bills.

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He said: "This change will mean that affected businesses will pay tax on profits for more than a 12-month period in the tax year 2023 to 2024 as they transition into the new 'tax year basis'.

"While it will be possible to spread any excess profits over five tax years, the Exchequer Impact of the change is significant.

"Between 2024-25 and 2026-27 it is expected to raise an extra £1.715billion.

"There will be further impacts over the following two years so the overall impact could be over £2billion."

The body said the self-employed are likely to incur one-off costs, including familiarisation with the rules, updating software, and deciding whether to change their accounting date to March 31 or April 5.

It added that while the government's estimated costs for this "is considered to be negligible", it believes this is "unrealistic".

The Chancellor said there is no extra taxes for the self-employed and that the "Budget scorecard" reflected previously announced policies.

A Treasury spokesperson said: "This assumption is totally wrong – there were no extra taxes for self-employed in the budget last week.

"These reforms simplify the system to avoid people getting double taxed and are fiscally neutral, with the OBR saying it reduces revenue in the long term."

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