News & Events
Important News for GP Practices with non-March Year Ends
22nd September 2022
Important News for GP Practices with non-March Year Ends
There are changes coming in to effect in the tax year 2024/25 which will impact on GP practices with non-March year ends. Rowleys’ specialist medical team share more on how it may impact on your tax, cash flow and potential retirement plans.
What’s changing?
At the moment, you are taxed on the profits you declare in your accounts during the tax year, so for example, if your year end is 30 September 2022, you will declare these profits in your 2022/23 tax return and submit this to HMRC by 31 January 2024.
From 2024-25 this will change and you will be assessed on profits earned during the tax year, i.e. 1 April 2024 to 31 March 2025.
Transitional Year & Relief
There could be an impact on your tax charges in the transition as you will have additional profits subject to tax given the extended accounting period.
Example:
| Accounting Period | Period | Tax Assessed |
| 30th September 2022 | 1st October 2021 to 30th September 2022 | 2022/23 |
| 30th September 2023 | 1st October 2022 to 30th September 2023 | 2023/24 |
| 6 months to 31st March 2024 | 1st October 2023 to 31st March 2024 | 2023/24 |
| 31st March 2025 | 1st April 2024 to 31st March 2025 | 2024/25 |
TRANSITIONAL YEARS IN RED
In this example you will be taxed on 18 months of profit from 1 October 2022 to 31 March 2024 creating a larger tax liability and potentially impacting on tax bands.
In the transitional tax year (2023/24) any ‘overlap profits’ for an individual partner (profits that were taxed twice when joining a non-March year end partnership) will be deducted from the transitional year profit, to reduce the profits charged.
Any remaining ‘transitional profit element’ for the 2023/24 tax year will be spread over the forthcoming 5 tax years beginning with the 2023/24 tax year. If you cease to be a partner during the transitional period, any remaining profits will be taxed in your final year. It will be possible for partners to accelerate the spreading by making an election.
Important points to note:
- If you make the change before the 2023-24 tax year you will forfeit the option to spread transitional profits
- The transitional profits in each tax year are included in the calculation for pensionable pay
- Accounts will need to be prepared very quickly for the year ended 30 September 2024 (in this example) or estimates made for the profits arising from 1 October 2023 to 31 March 2024, which will need amending at a later date, which will incur additional accountancy costs. It will be important for the practice accounts to be kept up to date in real time to enable timely tax planning
- You can elect to accelerate all or part of the transition profits, which may be useful for tax planning if profits are reducing
- Practices that pay the partners’ tax will need to manage their cash flow carefully
- If you retire in the spreading period you will lose the spread option and your tax liability on transitional profits will crystallise at the point of retirement
- Transitional profits are ignored for tapering of Annual Allowance provided not changing year end before 2023-24
- Your accounting software will need to be updated with the change of year end dates
For specialist, professional advice or assistance on forecasting how these changes may affect you, please contact Paula Swann-Jones on 0116 2827000 or paula@rowleys.biz or Claire Farr on 0116 2827000 or claire@rowleys.biz