Do you need to amend a provisional return?

If you did not change your year-end to align with the tax year, you will have had to apportion the profits of two accounting periods, including one ended after the end of the tax year. If final accounts for the latter period weren’t available by the filing deadline, you will have had to use a provisional profit figure. Once you have signed the final accounts, do not forget to file an amended tax return showing the final figures.

Can you reduce your payments on account?

Many partners of partnerships with property income had quite a shock when calculating their tax liabilities for the 2023/24 transitional year, with some partners having up to 23 months of rental income assessed in the one tax year. Unlike trading profits, these transition period profits cannot be spread over five years.

The second payment on account for the 2024/25 tax year, which is based on the 2023/24 tax year, is due on 31 July 2025. If you haven’t already done so, and you have draft accounts figures for the year, you should consider whether lower taxable profits mean that your tax liability for 2024/25 is likely to be less than 2023/24. If so, you could make a claim to reduce your payments on account and hence pay less tax at the end of July.

You should be aware, however, that if you reduce your payments on account too much, you will pay interest on the tax underpaid.

This is an incentive to prepare your accounts as soon as possible after the end of the tax year.

Transition profits

It is worth remembering that any transition profits arising in 2023/24 are taxable over a five-year period. A minimum of 20% of the transition profit is taxed each year, but it is possible to bring more profit into account in any one tax year. This should be considered if profits are low or losses are made in a particular tax year, as it gives the opportunity to tax the transition profits at a lower rate of tax.

Please do contact me or your usual Rickard Luckin contact if you would like to discuss these points further.

This article is from the latest edition of our Agricultural Briefing. To receive future copies of any of our newsletters directly to your inbox, please  visit our preference centre  to register your interest.