Sole Trader Self Assessment - fluctuating income

Acting_Director

I'm an actor and, whilst I didn't make a loss, last year was a very poor year for income (after the writers' strike etc). This year, however, has been much stronger with a contract that is running April-April. I also received buyout payments for work I did in previous years.  I use the cash basis for self assessment.   

Am I allowed to correct my previous S/A return to include the buyouts or is there some other way to average out my income for the two years so I'm not penalised for the delay in receiving payments?  

The expectation is also that, after this contract finishes, my income will go down again next year. 
Thank you for any help you can give me! 

Nomunnofun1

Acting_Director said:

I'm an actor and, whilst I didn't make a loss, last year was a very poor year for income (after the writers' strike etc). This year, however, has been much stronger with a contract that is running April-April. I also received buyout payments for work I did in previous years.  I use the cash basis for self assessment.   

Am I allowed to correct my previous S/A return to include the buyouts or is there some other way to average out my income for the two years so I'm not penalised for the delay in receiving payments?  

The expectation is also that, after this contract finishes, my income will go down again next year. 
Thank you for any help you can give me! 

Not if you use the cash basis. 

DullGreyGuy

Cash accounting means the income is booked on the date its received not the date it was earned. I would struggle to see how cash received this year could be retrospectively applied to last year? 

I am not however an accountant and my accountancy experience doesn't come from acting or the concepts of buying out your rights to royalties etc. You may want to speak to an accountant with a leaning towards this sphere, it gives you the advantage of someone to potentially pursue if the advice turns out to be bad.

SacredStephan

To the OP, have you looked at the Equity website?
https://www.equity.org.uk/advice-and-support/social-security-tax-and-financial-support

Acting_Director

Thanks all for the advice.  It feels frustrating that, had the buyouts been paid on time, I would owe significantly less tax on them.  I'll see what Equity's team come back with as well. 

DullGreyGuy

Acting_Director said:

Thanks all for the advice.  It feels frustrating that, had the buyouts been paid on time, I would owe significantly less tax on them.  I'll see what Equity's team come back with as well. 

Its swings and roundabouts, on an accruals basis you have to pay taxes on work you've invoiced but are still chasing for payment on so can cause major cashflow issues.

Jeremy535897

You should seek advice on whether you can amend your previous tax return (I assume this is 2023/24) to change from cash to accruals basis. If you can, and I can't see why you would not be able to, then do so, but be aware there will be interest on any underpaid tax.

Acting_Director

SacredStephan said:

To the OP, have you looked at the Equity website?

Equity's response: 

"What you describe would, I believe, entail switching away from the cash basis and I’m afraid that’s not something that we have expertise on in this team, so you would need to consult an accountant for advice on whether that would be in your interests and if so how to achieve it."