This year, many left it to the very last minute to fill in their 2023/24 return. Some 780,000 taxpayers submitted their tax return on the final day, 31 January 2025, and nearly 33,000 doing so during the final hour of 31 January. Avoiding any last-minute difficulties due to changes to the return is important.  

Stephen Relf, ICAEW Technical Manager, Tax, said:  

“Many taxpayers are keen to get their tax affairs in order early, and thoughts may now be turning to the completion of the 2024/25 tax return. To help, we’ve identified some of the areas where tax rates, rules or allowances, or the tax return itself, have changed for 2024/25. And we’ve provided tips for looking ahead to 2025/26.

“Don’t forget that HMRC provides a range of tools and guidance to help with completing the tax return. Download HMRC’s app to get your national insurance number or to check your entitlement to the state pension. Also, taxpayers can set up a budget payment plan with HMRC, allowing them to make weekly or monthly direct debit payments toward their next income tax self assessment bill.”

The changes ICAEW have highlighted are:

1. Capital gains tax (CGT) rate changes

The rates applying to disposals of assets other than residential property and carried interest made after 30 October 2024 increased from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers. This in-year change to the main rates of CGT presents a challenge.

The ITSA return may not automatically calculate at the new main rates. To help with this, HMRC has published a calculator to work out an adjustment figure that can be entered onto the return.

Other CGT changes for 2024/25 include a reduction in the tax-free annual exempt amount from £6,000 to £3,000, bringing more people within CGT, and a cut in the rate of CGT on disposals of residential property by higher rate taxpayers, from 28% to 24%.  

2. New crypto asset returns boxes

The 2024/25 tax return includes new boxes (13.1-13.8 of the CGT summary pages) to report profits and losses realised on the disposal of crypto assets. For 2023/24 returns and earlier, the figures were included on the boxes for other property, assets and gains.  

HMRC has been increasing its compliance activities in this area. Last August it launched a one-to-many campaign targeting taxpayers it suspected of not having paid the correct amount of tax. HMRC will have more information to draw on once the crypto asset reporting framework begins to be implemented in the UK, from 2026.

3. Changes to the cash basis for sole traders and partners

Traditionally, sole traders and partners calculated their profits on the accruals basis. More recently, they were given the option to use the cash basis, that is calculating profits and losses based on cash received and paid out. For 2024/25 onwards, the cash basis is the default basis for most sole traders and taxpayers. This means that if they want to continue to use the accruals basis they must elect to do so. It is likely that many more taxpayers will now use the cash basis.

The cash basis is regarded as being simpler than the accruals basis as it removes the need to make what can be quite complicated year-end adjustments (e.g., accruals and prepayments). However, there may be a learning curve for taxpayers in the first year and they will need to ensure they complete the appropriate boxes in their tax return. Further, an adjustment to profits/losses may be required when moving from one basis to another. Taxpayers may also need to calculate profits under both the cash basis and the accruals basis in order to make an informed choice. 

Taxpayers who previously used the cash basis, and will continue to do so, should also be aware that changes have been made to the rules for 2024/25 onwards, for example, there are now more options for utilising a loss.

4. New tax year basis

2024/25 is the first tax year in which trading profits are calculated on the tax year basis. For 2022/23 and earlier, profits were calculated by reference to the basis period and 2023/24 was a transitional year.  

Where transitional profits arose in 2023/24, the default position is that 20% of those profits are to be taken into account for 2024/25. It is possible to elect to accelerate the amount of transition profits charged to tax, in 2023/24 and in subsequent tax years. All remaining transitional profits must be taken into account in the tax year in which the business ceases.

It is possible to prepare accounts to a date other than 5 April (or any of 31 March – 4 April which are treated as 5 April for this purpose), in which case it may be necessary to apportion the results of one or more periods of account to calculate the profit or loss for the tax year. Provisional figures can be used where it is not possible to finalise accounts before the deadline for submitting the return, with HMRC offering guidance on provisional figures.

5. Making Tax Digital

Sole traders and landlords with total combined gross sales and rents of more than £50,000 will need to comply with Making Tax Digital (MTD) for income tax from 6 April 2026. The turnover threshold is reduced to £30,000 from April 2027 and to £20,000 from April 2028, bringing many more taxpayers within scope.

Taxpayers within MTD income tax will need to keep digital accounting records and send quarterly updates to HMRC of their sole trade and property income. Completing the return is a good opportunity to consider if and from when you will be in MTD income tax, and what you need to do to prepare.

ENDS