Basis period reform
8th April 2022
From the 2024/25 tax year, HMRC are looking to tax profits of unincorporated businesses on a tax year basis, rather than on the accounting year (or period) basis, effectively removing the current basis period rules.
Therefore, any unincorporated businesses without a 31 March or 5 April year end will be affected by these changes.
HMRC have introduced a ‘transitional year’ to help with the change, as well as some reliefs. The main two reliefs available are:
- Relief for any overlap profits that may have arisen within the first few years of trading
- Spreading – this is where any extra months profit that arise as a result of these changes can be spread over five years to ease the tax burden.
Of course with the recent pandemic, many businesses have seen profits reduce, and it might be beneficial to change their accounting period before the transition year.
It will therefore be worthwhile considering each client with a non 31 March or 5 April year end individually to determine the best course of action.
Please contact your local office if you require further advice on this matter.
Disclaimer - All information in this post was correct at time of writing.
