Barrister Tax: Early Years of Practice
Introduction: Stepping into the Bar
As you make your transition from pupillage to junior barrister, understanding the tax implications of your early years of practice is crucial. The Bar Standards Board (BSB) and the Bar Council provide comprehensive guidance, but the information can be complex. This article provides a simplified view of tax matters relevant to junior barristers in England and Wales.
If you are a barrister in need of professional advice concerning your accounts, Jack Ross Chartered Accountants can help. Use the contact form on the right and one of our barrister tax experts will be in touch.
Why Focus on the Early Years of Practice?
Tax considerations in your early years of practice can significantly influence your financial planning. The rules around tax assessment for barristers are particular and can differ from other self-employed or employed individuals. Understanding these rules aids better financial management and compliance with HMRC regulations.
The Basics: Understanding Pupillage and Practising Periods
What is Pupillage?
Pupillage is the initial period where you train under the supervision of a senior barrister. This phase is critical as it prepares you for your years of practice at the Bar.
From Pupil to Junior Barrister
After completing your pupillage, you typically become a tenant in a chamber and begin your practice as a junior barrister. This transition is where specific tax rules begin to apply.
Tax Considerations in Early Years: ITTOIA and Basis Periods
The law around tax for barristers is defined in the Income Tax (Trading and Other Income) Act 2005 (ITTOIA). The act sets the “basis period” for tax assessment:
First Year: The basis period starts from the date you begin to practise and ends on the following 5 April.
Second Year: The basis period for the second tax year depends on your accounts. If you have a twelve-month period of account ending in that tax year, that becomes the basis period. Otherwise, more complicated rules apply.
Example Scenarios
To make this easier to understand, consider the following example:
- Elizabeth, a junior barrister, started her practice on 20 April 2020 and prepared her first set of accounts up to 30 April 2021. Her assessable profits would be calculated based on specific proportions of the days within the tax years concerned.
The rules aim to assess the profits of a practice only once during its lifetime. However, the same profits might form the basis for more than one tax year, creating “overlap profits.” These can be set off during a change in accounting date or at the cessation of practice.
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Tax Timelines and Deadlines: Payments and Notifications
Under the self-assessment regime, tax for each year is generally paid in two instalments:
- First Payment: 31 January in the year of assessment.
- Second Payment: 31 July after the end of the year of assessment.
For new practitioners, the entire tax for the first year will be due on 31 January following the end of the fiscal year in which practice commenced. Additionally, the first payment for the next year will also be due at that time, resulting in a total payment of 150% of the tax due for the first year.
Expert Guidance and Mentoring Schemes
As a junior barrister, it is invaluable to seek advice from more experienced members of your chamber or accountants like Jack Ross who specialise in barrister tax issues. Many chambers offer mentoring schemes to help newly qualified barristers understand these complexities.
Equip Yourself for Financial Success
Understanding tax rules is not just about compliance; it is about financial planning for your early years of practice as a junior barrister. These rules and timelines may seem complicated, but with careful planning and guidance, you can navigate them effectively.
Seeking specialised accounting services for barristers? Complete the contact form below and a Jack Ross advisor will be in touch to discuss tailored solutions.
The basis period for tax assessment for junior barristers is defined in the Income Tax (Trading and Other Income) Act 2005 (ITTOIA). In the first year, it starts from the date you begin to practise and ends on the following 5 April. The second year’s basis period depends on your accounts and may involve more complicated rules.
Junior barristers generally pay tax in two instalments: the first payment is due on 31 January in the year of assessment, and the second payment is due on 31 July after the end of the year of assessment. For new practitioners, the entire tax for the first year is due on 31 January following the end of the fiscal year in which practice commenced.
Overlap profits may occur when the same profits form the basis for more than one tax year. These can be set off during a change in accounting date or at the cessation of practice. It’s advisable to consult with experienced members of your chamber or specialised accountants to navigate this complexity.
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