The transitional year of basis period reform is now underway. It will be important to ensure that any available overlap relief is used. However, getting hold of information about overlap relief may be tricky.

We have commented previously about the reforms to the basis year calculations for self-employed sole traders and partners. This tax year, 2023/24, is the transitional year for these reforms. Our most recent Bulletin covered this. Our earlier Bulletin outlined how the reforms will operate, and a subsequent Bulletin added an update on MTD ITSA.

To help explain what is happening this tax year, consider the situation for an individual who has a trading year ending on 30 April. Under the pre-2023/24 basis year system, the end April date had the advantage of deferring tax because in any tax year, the calculation of tax was based on roughly 11 months of profit in the previous tax year. For example, in 2022/23, the taxable profit would be based on the trading period ending on 30 April 2022.

In 2023/24, the advantage of 30 April year end morphs into a disadvantage because tax will be based on:

1. Trading income to 30 April 2023, plus
2. Trading income from 1 May 2023 to 5 April 2024 (341/366ths of the trading year to 30 April 2024 as 2024 is a leap year), less
3. Any unused overlap relief available.

By default, the sum of 2 and 3 (the transitional profits) will be divided by five and spread over five tax years – 2023/24 to 2027/28.

Overlap relief

If the individual used an accounting date between 6 April and 30 March when they started their business, they may have paid tax twice on some of their profits and be entitled to overlap relief. So, in the above example, roughly the very first 11 months of profit would have been taxed twice. That could have been some considerable time ago.

Usually, businesses can only use overlap relief to get this tax back when they stop trading or when they change their accounting date. However, HMRC will allow any business that uses any accounting period and that has unused overlap relief to use it in the 6 April 2023 to 5 April 2024 transition year.

HMRC has now announced that, this summer, it is planning to launch an online form for submitting requests for details about overlap relief. This will provide an easier way to submit requests and make sure that these are dealt with separately from general post.

HMRC will also be publishing additional accompanying guidance on overlap relief and the changes to the rules for the new tax year basis.

Taxpayers with an accounting date other than 31 March or 5 April who are affected by the move to the new tax year basis may need to find out the details of their overlap relief. They’ll need to do this ahead of submitting returns for the 2023/24 transitional year.

Overlap relief information can only be provided if these figures are recorded in HMRC systems, taken from information submitted by taxpayers as part of previous tax returns. If this information has not been submitted in tax returns, HMRC will not be able to provide it.

When looking at a request for overlap relief information, HMRC needs some details about a business to be able to find the correct figures to report back to the taxpayer. If anyone wants to submit a request for information ahead of the launch of the online form, HMRC asks that they provide as much of the following information as possible:

• taxpayer name;
• National Insurance number or Unique Taxpayer Reference (UTR);
• either name or description of business, or both;
• whether this business is a sole trader or part of a partnership;
• if the business is part of a partnership, the partnership’s UTR;
• date of commencement of the self-employed business, or date of commencement as a partner in a partnership (if not known, then the tax year of commencement);
• the most recent period end date up to which the business used to report its profit or loss.

Ahead of more guidance being published on GOV.UK, information on overlap relief and basis period reform is provided in the Business Income Manual. Information is also available in a GOV.UK news article on basis period reform.

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Laura Trott lays out regulations to allow for delay in the accessibility of the Pension Dashboard until the last quarter of 2026.

In a written ministerial statement, Laura Trott says:

“Pensions dashboards will transform the way in which people plan for retirement. On 2 March 2023, I announced that the Pensions Dashboards Programme would require additional time to deliver the connection of pension providers and schemes, in accordance with the connection deadlines set out in the Pensions Dashboards Regulations 2022 and the Financial Conduct Authority’s corresponding pensions dashboard rules.

More time is needed to deliver this complex build, and for the pensions industry to help facilitate the successful connection of a wide range of different IT systems to the dashboards digital architecture. As part of our reset of the Pensions Dashboard Programme, I am today laying amending Regulations with a new approach to delivery that allows us to work more collaboratively with the pensions industry. Rather than setting out the entire staging timeline in legislation, we will instead set this out in guidance which we will collaborate on with industry this year. This will give the Pensions Dashboards Programme the flexibility it needs to ensure this complex project is completed effectively.

In recognition that the requirement to connect to the digital architecture should remain mandatory, we will include a connection deadline in legislation of 31 October 2026. This is not the Dashboards Available Point – the point at which dashboards will be accessible to the public – which could be earlier than this.

The Government remains as committed as ever to making pensions dashboards a reality and we are ambitious about their delivery. I am confident that this re-appraised approach will enable us to make significant progress on delivering dashboards safely and securely, enabling consumers to take advantage of their benefits to plan for retirement.”

Comment

Although there have already been delays, this acknowledges that there is still a lot to be done to provide a working and useful dashboard for the public. It is better that it is launched when finished than pushed out half-finished and possibly with errors. If the data provided isn’t up to standard from day one, it could lose credibility with the public and would just be a waste of all the time and effort already put in by the industry.

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The Treasury has published a call for evidence on potential improvements to SAYE and Share Incentive Plan (SIP) schemes.

On 5 June, the Treasury launched a call for evidence on the Save As You Earn (SAYE) and Share Incentive Plan (SIP) employee share schemes. The call, which had been trailed in the March Budget, is accompanied by an HMRC evaluation of both schemes, alongside the Company Share Option Scheme (CSOP). The CSOP is not part of the call for evidence, but following a Budget announcement that scheme was revised from the start of 2023/24. There was a doubling of the option limit to £60,000 and a relaxation of the definition of eligible shares.

Neither the SAYE nor SIP schemes have shown much growth in recent years, as the graphs below, based on the latest (2020/21) HMRC data, show:

The SAYE scheme has not been helped by the zero bonus returns on offer from 2014. Even with the new bonus provisions recently announced (please see our earlier Bulletin) the return on offer with the Bank (Base) Rate at 4.75% will be (from 18 August) just 1.75%, albeit tax-free.

Both schemes have also been victims of the dull performance of UK shares. For example, as at 6 June 2023, the FTSE 100 Index was 1.3% below its level of five years previous.

Comment

As we approach the next election, there is no sign that the Labour Party will be revising its 2019 manifesto proposal to transfer 10% of all company equity to employees over ten years.

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From tax year 2023/24 onwards, the self-assessment threshold for individuals taxed through PAYE only, will change from £100,000 to £150,000.

HMRC has confirmed that affected taxpayers do not need to do anything now as the self-assessment threshold for 2022/23 tax returns remains at £100,000.  They will receive a self-assessment exit letter if they submit a 2022/23 return showing income between £100,000 and £150,000 taxed through PAYE and they do not meet any of the other criteria for submitting a self-assessment return.

For the 2023/24 tax year onwards, taxpayers will still need to submit a tax return if their income taxed through PAYE is below £150,000 but they meet one of the other criteria for submitting a self-assessment return, such as:

• receipt of any untaxed income;
• partner in a business partnership;
• liability to the High Income Child Benefit Charge;
• self-employed individual and with gross income of over £1,000.

Taxpayers can check whether they need to submit a return here.

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