The Institute of Chartered Accountants in England and Wales (ICAEW) has predicted that sole traders and partners may face higher tax bills than expected next year as a result of a government proposal to shift the date when certain businesses disclose their income.
The proposal would raise billions of pounds for the Treasury years before it would have otherwise received the funds, and it would decrease the amount of operating capital available to partners and sole traders for up to five years.
Last month, plans were revealed in a consultation and draft legislation to change the 12-month timeframe used by partners and sole traders to calculate profits, bringing everyone in line with either 31 March or the end of the tax year on 5 April.
Tax liabilities that businesses and their partners can currently delay by deferring the end of their accounting year will be brought forward as a result of the change.
Based on tax returns for 2019/20, the measure is expected to affect almost 250,000 partners and 280,000 sole traders.