Key Updates to the Tax Compliance Syllabus for 2025

Chapter 1: Ethics

In the Ethics chapter, several key updates have been made:

1. Whistleblowing has been added as a new topic. The Public Interest Disclosure Act 1998 (PIDA) protects workers who report wrongdoing in good faith. ICAEW has provided guidance on professional conduct related to defaults or unlawful acts, indicating that disclosure in the public interest would not breach the ICAEW member's ethical duty of confidentiality.
2. Data protection compliance is now monitored by the Information Commissioner's Office (ICO). HMRC has appointed a Data Protection Officer (DPO) to ensure compliance with its data protection obligations.
3. HMRC's Connect system now integrates data from multiple sources to cross-reference and validate data across various points.

Chapter 2: Income Tax Computation

The Income Tax Computation chapter has been updated with the following changes:

1. Most payments made under compensation schemes such as the Windrush Compensation Scheme and some from the Post Office Horizon Compensation are now exempt from tax.
2. The Child Benefit tax charge has been revised. The charge now applies to taxpayers with adjusted net income over £60,000 (previously £50,000) who receive Child Benefit or whose partner receives it. The charge is 1% of the Child Benefit amount for each £200 of income between £60,000 and £80,000.

Chapter 6: Trading Income

Significant changes have been made to the Trading Income chapter:

1. From 2024/25, the default method for preparing accounts and taxable trading profit for sole traders and partnerships (but not LLPs) is the cash basis. Sole traders and partnerships may elect to use the accrual (GAAP) basis, while LLPs are required to use the accrual basis.
2. New tax year basis rules have been introduced. For example, if a business started in 2023/24 and ceased trading on 31 December 2026, the cessation would occur in 2026/27, and profits taxed in 2026/27 would be from 6 April 2026 to 31 December 2026.
3. Late accounting date rules have been updated. If the accounting date falls between 31 March and 4 April, profits for the days after the accounting date up to and including 5 April are treated as nil and will be included in the following tax year.

Chapter 10: Cash Basis of Accounting

The Cash Basis of Accounting chapter has been significantly expanded:

1. From 2024/25 onwards, the cash basis is the default method for unincorporated businesses to prepare their accounts for tax purposes.
2. Capital expenditure on assets (excluding cars and non-depreciating assets like buildings and land) is now allowable as an expense when incurred under the cash basis.
3. Bad debts are not an allowable deduction under the cash basis, as income is only taxed when received.
4. When moving to the cash basis, adjustments must be made to ensure that receipts are taxed only once and payments are only deducted once.

Other content has been added so to download our free PDF summary of the main syllabus changes, click the link below.

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