GP Tax reforms – Plan ahead for 2024

GPs and practices are likely to face higher tax bills in 2023/24

In the 2023/24 tax year, HMRC is reforming how they calculate taxes from profits that will affect businesses and self-employed individuals from April 2024.

This reform will change the time period of when the taxable profits are calculated to align with the standard tax year (April to March). Under the current rules businesses’ are able to use their own accounting year, which can be a date of their choice.

Why will this reform increase GP’s tax bill?

If your accounting year is already in line with the standard accounting year (31^st March or 5^th April) then you tax bill will be unaffected by this change. However, if this is not the case you are likely to receive a higher tax bill for the 2023/24 tax year because this will be a transition year where you accounting year end for GPs and GP practices will be moved.

How will the transition tax year work?

In the 2023/24 tax year, GPs and practices will be taxed on more than 12 months of profits. This is because you will be taxed for your current accounting period plus the number of months to the 5^th April 2024.

For example, if you are using the fiscal year end (31 December) you will be tax on profits from 1 January 2023 to 31^st December 2023. However, because this is the transitional year you will also be charged tax on profits between 1^st January 2023 and 31^st March/5^th April 2024. Therefore, you will be taxed on 15 months’ worth of profits instead of 12 months. It is important to note that the additional profit taxed can be spread over a 5 year period to help with cash flow.

It is not a requirement to change your accounting period (But is it recommended!)

Whilst it is not a requirement to move your accounting period to 31^st March or 5^th April in the transition year, we would recommend it. For practices that decide to keep their current accounting period, HMRC will require you to submit two submissions each year. As a result this would lead to more work for you and your accountant which would result in higher costs.

The importance of planning ahead

If you’re accounting period is currently not the same as the standard tax year (April to March), we would recommend that you consider how the transitional year will affect your tax bill. These additional profits could have serious implications on your tax bill.

Tax on GPs and GP practices can be a complex area and we would recommend speaking to your accountant or tax adviser if you have any concerns around how the transitional year could affect your tax bill.

How can we help?

At Hawsons our dedicated team of GP accountants and tax advisers that offer a specialist service to GPs and their practices, utilising our in-depth knowledge and experience in the sector.

Find out more about our GP Accountants.