This article has been updated in August 2025 to reflect the latest HMRC guidance and what it means for your next tax return.
Starting from 6 April 2024, HMRC will implement a series of changes that aim to simplify and modernise the Self Assessment tax system. These changes will affect self-employed individuals, sole traders, and partnerships, and will introduce new rules for income thresholds, digital record-keeping, and basis period reform.
Changes to income thresholds
One of the most notable changes is the adjustment of income thresholds that determine who needs to submit a Self Assessment tax return. For individuals in employment whose income is collected through PAYE, the threshold for mandatory Self Assessment filing has increased from £100,000 to £150,000 starting in the 2023-2024 tax year. If you fall into this category and earn less than £150,000, you won’t need to submit a Self Assessment form, given you don’t meet specific criteria. However, if you’re self-employed with a gross income over £1,000, a partner in a business partnership, liable for the High-Income Child Benefit Charge, or receiving any untaxed income, you’ll still be obligated to file a Self Assessment return irrespective of income.
It’s vital to note that these changes may lead to thousands paying more tax, as the previous threshold for the additional tax rate of 45 per cent was £150,000. Now, those earning over £125,140 will be subject to this higher tax rate.
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Digital record keeping
With the new Self Assessment changes, all financial records must be kept in a digital format. This could entail using bank feeds, electronic invoices, or uploading photos of paper records. It’s essential to ensure that these digital records are maintained for 5 years and 10 months following the end of the tax year, unless HMRC specifies otherwise.
Basis Period Reform (BPR)
Starting from April 2024, the basis period reform (BPR) rules will come into play. This reform is set to affect self-employed sole traders and partnerships, particularly those whose accounting period does not end on specific dates between 31 March and 5 April. Under BPR, all self-employment and partnership profits will be taxed on a tax year basis, starting from the 2024-2025 tax year. For businesses that do not have an accounting period ending on the mentioned dates, it might be necessary to consider changing the accounting period to align with the tax year for a smoother transition. If unused overlap relief exists, it should be claimed in the 2023-2024 tax year to avoid losing it. Overlap relief can reduce the amount of taxable profits during the transitional period.
To navigate all of these reforms effectively, individuals and businesses are encouraged to seek professional advice and stay informed about the specific implications of these changes on their financial responsibilities.
How will this affect income tax?
If you’re wondering how these changes will impact your income tax, it’s likely to have an effect. The income threshold for self-assessment will increase from £100,000 to £150,000, potentially exempting more individuals from filing returns.
How can I need to prepare for the Self Assessment changes?
To prepare for the Self Assessment changes, it’s important to stay informed, assess your eligibility, and consult an accountant or tax advisor. To get ready for the changes, there are several things you can do:
- Stay informed: Firstly, stay informed by keeping yourself updated with the latest information from HMRC and other relevant sources. As the changes draw nearer, HMRC is likely to provide detailed guidelines and resources to help you understand and adapt to the new system.
- Assess your eligibility: Secondly, assess your eligibility by reviewing your income to determine whether you fall within the new income threshold. If your income is below £150,000 and you don’t meet any of the specified criteria, you may no longer need to file a Self Assessment return. Understanding your status is crucial for avoiding unnecessary compliance burdens.
- Consult a professional: Thirdly, seek guidance from a tax advisor or accountant to understand how the changes will affect you personally and how to best prepare. The Self Assessment changes for 2024 are complex, and their impact on your specific financial situation may vary.
- Consider changing your accounting period: Fourthly, be prepared to claim unused overlap relief for the 2023/24 tax year to avoid losing this valuable tax relief. Additionally, if your accounting period doesn’t align with the tax year and you find it challenging to adapt to the new reporting requirements, consider changing your accounting period. Evaluate the conditions for making this change, which may vary if done in the 2022/23 or 2023/24 tax year.
Remember that the upcoming Self Assessment changes are designed to enhance the efficiency and accuracy of the filing and submission process. Proactive preparation will help you navigate these changes effectively, reducing the risk of errors and ensuring you stay compliant.
Make Self-Assessment easy
If you need help understanding how the Self Assessment changes will affect you personally and how to best prepare, it’s always best to consult an accountant or a tax advisor. They can provide invaluable guidance to help you navigate these changes effectively and reduce the risk of errors.
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