HMRC has introduced a new calculator to help self-employed individuals determine their transition profit for 2023-24, under the basis period reform rules.
From 2024-25, all unincorporated businesses will be taxed on their profit or loss arising in the tax year, regardless of their accounting period end date.
To arrive at this position, 2023-24 is a transitional year for businesses whose year-end is not from 31 March to 5 April.
HMRC's new calculator aims to assist taxpayers in calculating their Basis Period Reform transitional profits for the 2023-24 transitional year.
- Users must provide details such as their overlap relief amount, accounting profits and adjustments necessary to calculate their taxable profit or loss.
- Taxpayers cannot use the calculator if:
- Their business is a partnership.
- They have three or more accounting periods that fall partly or wholly within the period from the end of their 2022-23 basis period to 5 April 2024 or their accounting date if it is on or between 31 March and 4 April 2024.
- The calculator operates on the assumptions that:
- Profits are apportioned by reference to days.
- Losses brought forward and trading income allowance (if claimed) will be set against standard profit before transition profit.
See Basis Period reform for the full transition profit calculation broken down step-by-step, including a worked example.
Useful guides on this topic
Basis Period reform
What is basis period reform? Who is affected? What is the new basis year for tax? What are the transitional rules?
Accounting periods and tax basis periods
Which date do I choose? Does it matter? Can I change my accounting date? What changes are proposed as a result of the reform of basis periods?
Averaging claims
When can profits be averaged? What trades do averaging apply to? How are averaging adjustments calculated and made?
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