What are the changes ahead when it comes to income tax reporting?
Each year brings updates and changes to self-assessment returns. Typically, these changes are minor, but the latest Budget introduced some significant late adjustments. We saw changes to forms like the SA 100 for individuals and the SA 900 for trusts and estates both of which reflected the new legislation. We also saw the adjustment box for Capital Gains Tax (CGT) on the CGT pages and this is likely to play a crucial and significant role and change for many taxpayers.
Income tax reporting – what changes are there in the 2024/25 tax year?
Capital Gains Tax (CGT) Revisions
In October 2024, Chancellor announced changes to CGT rates for non-residential assets, including shares, land, and cryptoassets. The basic CGT rate rose from 10% to 18%, and the higher rate increased from 20% to 24%. These changes took effect immediately, meaning they will apply to disposals after 30 October 2024.
Although there have been CGT rate changes in previous years, this one was announced late in the tax year, meaning that HMRC had already finalised the 2024/25 SA100 return by then.
As a result, taxpayers who have disposals subject to the new rates will need to report an “adjustment to tax figure” on the SA108 form. Tax agents should be able to rely on their software to handle this calculation.
Trusts and Estates
For trustees and personal representatives, a new adjustment box will appear on the SA905 form, with a calculator provided to help them calculate the necessary adjustments.
Some trust and estate advisers might face practical challenges with these changes. It’s not unusual for a tax return to be filed early—before the end of the tax year—when a client passes away or a trust or estate is finalised. Often, a paper version of the previous year’s return is used, with handwritten amendments. However, because there’s no adjustment box on the current SA900 form, HMRC has advised trusts and estates with non-residential CGT disposals after 30 October 2024 to delay filing until the 2024/25 SA900 is available in April to ensure correct CGT rates are applied.
Cryptoassets Reporting
In the 2024/25 tax year, individuals with cryptoassets will face an additional layer of reporting. In addition to having disposals affected by the new CGT rates after 30 October 2024, cryptoasset holders will also need to separately report income and gains from crypto transactions.
This new requirement, first announced by Chancellor Jeremy Hunt in March 2023, aims to help HMRC utilise the data it expects to receive starting in 2027. Initially, it was estimated that this change could generate an additional £10 million in tax revenue annually. While details on this initiative have been sparse, individuals involved in crypto transactions will need to be prepared for this new disclosure.
Income tax reporting – looking ahead to the 2025/26 tax year
Close company disclosure requirements
For directors of close companies, the 2025/26 tax year will bring more detailed disclosure requirements. Directors will need to confirm whether they are part of a close company and report:
- The close company’s name and registration number
- The total amount of dividends received from the company, separately from other dividends
- The highest percentage of the company’s share capital held during the year
The most complicated aspect of this will be determining the percentage of share capital held, especially if there are different classes of shares with varying voting rights or capital/dividend rights. The Association of Taxation Technicians (ATT) has called for clearer guidance on how to calculate and report these holdings.
Business Start and Cessation Dates
Starting from 2025/26, taxpayers with unincorporated businesses will need to report the start or cessation date of the business during the tax year. While this requirement may seem straightforward, some situations, such as trading under the trading allowance for an extended period, could make it difficult to pinpoint the exact dates. The clarity of these dates is important, especially when claiming reliefs like business asset disposal relief, so taxpayers should proceed with caution.
Looking ahead – income tax reporting potential changes for 2026/27 and beyond
Looking further ahead, individuals with annual turnover above £50,000 will begin reporting under the Making Tax Digital (MTD) system. If you would like to learn more about the new MTD reporting requirements, you can view our recent webinar on the topic here.
The details of the new year-end submission process are still unclear, it’s expected that additional adjustments and new requirements will emerge, posing further challenges for taxpayers and their advisers.
These changes on the horizon all highlight the importance of staying informed and prepared for upcoming tax reporting requirements. With substantial updates ahead taxpayers will need to stay aware and keep up to date as things evolve.
If you would like to speak to a member of our team about income tax reporting, the changes ahead and how these changes might impact upon your affairs both now and in the future, please contact us on 020 7870 9050.
