From 2024-25, all unincorporated (self-employed) businesses will be taxed on their profit or loss arising in the tax year, regardless of their accounting end date. 2023-24 is a transitional year.

This is a freeview 'At a glance' guide to tax Basis Period reform.

Subscribers, see Basis Period reform for examples of how the new rules work and FAQ’s.

At a glance

  • Under the current rules for Self Assessment, sole traders and partners are taxed on the profits of their business accounting period that ends in that tax year: this is the Current Year Basis (CYB).
  • The Current Year Basis ceases from 2024-25 when all unincorporated businesses will be taxed on their profit or loss arising in the tax year, regardless of their accounting end date. This is the Tax Year Basis (TYB).
  • 2023-24 is a transitional year for businesses whose year-end is not coterminous with the tax year or not deemed to be, i.e. they have a year-end earlier than 31 March. These businesses will be subject to a special profit catch-up rule.
  • Businesses with a year-end of any date from 31 March to 4 April will be deemed to have a 5 April year-end.
  • This change does not affect property rental business which should already use a 5 April period end for tax.

Summary of basis period reform rules

Tax year and basis

Profits taxed (for continuing businesses)

E.g. Y/e 31/3

E.g. Y/e 30/9

2022-23

Current Year Basis

Profits for the accounting period ending in the tax year. 

Y/e 31/3/23

Y/e 30/09/22

2023-24

Transitional Year

Profits for the accounting period ending in the tax year plus

Profits from the end of the above period to 5 April 2024,

less any overlap relief brought forward.

  • Transition profits can be spread and taxed over 5 years. 
  • There are special rules for transitional losses.   

Y/e 31/3/24

Y/e 30/09/23 

187 days of Y/e 30/09/24 

less: overlap relief (if any)

2024-25 on

Tax Year Basis

Profits for 6 April 2024 to 5 April 2025.

Y/e 31/3/25

178 days of Y/e 30/09/24  

187 days of Y/e 30/09/25 


Tax Year Basis from 2024-25

  • Under TYB, profits taxable in the tax year will be those arising between 6 April and the following 5 April.
  • Businesses that have an accounting period ending before 31 March will need to apportion their profit or losses to the relevant tax years.
    • Apportionment of profits is by the number of days or any other reasonable method.
    • The method must be consistently used by the business.
    • You may need to estimate profits/losses to file tax returns on time. Estimated figures will need to be replaced with actual figures once they are available, see below. 
  • Accounting periods ending between 31 March and 4 April are deemed to end on 5 April.
    • An election to disapply this deeming rule will be available.
    • The time limit for the election is the first anniversary of the filing date of the tax year from which the election is to have an effect.
    • The election will last for five years.
  • Trades commencing between 1 April and 5 April in any year will have assessable profits in that tax year of nil. The profits arising in that year will be assessable in the following tax year instead.
    • An election to disapply this deeming rule will be available.
    • The time limit for the election is the first anniversary of the filing date of the year from which the election is to have an effect.
    • The election will last for five years.

Transitional rules

  • Businesses that do not have a 5 April or 31 March year-end may have Overlap profits which can be deducted in the 2023-24 transitional year.
  • The transitional year rules calculate a taxable profit as:
    • Profits of the accounting period ending in the tax year (CYB), plus
    • The profits arising from the day after that accounting period year-end until 5 April 2024, less
    • Any overlap relief.

Transitional profits will be automatically spread over the following five tax years.

  • In each of the four years beginning with 2023-24, 20% of the additional profits will be taxable.
  • In the fifth year, the balance of the additional profits will be taxable.
  • If the business ceases to trade before all of the additional profits have become chargeable to tax the remaining balance is taxable in the year of cessation.

An election can be made to tax any or all of the excess in any given year within those five years.

  • The election must specify the amount to be taxed.
  • The time limit for the election is the first anniversary of the filing date of the original Self Assessment return for the tax year in which the business wishes to bring in additional transitional profits.
  • Where the election is made, any remaining additional profits will be spread across the number of years out of the five that still remain.

Transition losses from overlap relief

Where due to the deduction of brought forward overlap relief:

  • A trading loss is created for 2023-24 where there would otherwise have been profit, or
  • An existing loss for 2023-24 has been increased due to the relief

the Terminal loss relief provisions will apply to that part of the loss created by the overlap relief, as if the trader had ceased to trade on 5 April 2024.

  • Any existing loss for 2023-24 is treated separately and will be available to relieve under the usual Loss relief.

Other transitional provisions to consider

Amending provisional figures

When it comes to amending provisional figures that have had to be used in a tax return as a result of a business having a non-5 April/31 March year end, HMRC have decided to:

  • Allow provisional figures to be updated in line with the normal time limits for making amendments to returns to allow amendments to be completed while preparing the business accounts for the following tax year.

Useful guides on this topic

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?

Losses, trade losses and sideways relief
How can trade losses be utilised? What are the restrictions?


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