Planning for Basis Period reform

The basis period reforms will change the way trading income is allocated to tax years. The reforms will change the basis period from a ‘current year basis’ to a ‘tax year basis’. Under the current rules there can be overlapping basis periods, which

The basis period reforms will change the way trading income is allocated to tax years. The reforms will change the basis period from a ‘current year basis’ to a ‘tax year basis’. Under the current rules there can be overlapping basis periods, which charge tax on profits twice and generate corresponding ‘overlap relief’ which is usually given on cessation of the business. The new method of using a ‘tax year basis’ will remove the basis period rules and prevent the creation of further overlap relief. 

The new rules are set to come into effect in the 2024-25 tax year with 2023-24 being a transitional year. During the transitional year, all businesses’ basis periods will be aligned to the tax year and all outstanding overlap relief given.

The changes will affect businesses which draw up annual accounts to a date different to 31 March or 5 April (mainly seasonal businesses and large partnerships), and businesses that commence from 6 April 2024. Affected businesses should ensure they are prepared for the changes as there may be implications on cashflow by accelerating profits into an earlier tax year as well as increased compliance costs.

Source: HM Revenue & Customs Tue, 19 Apr 2022 00:00:00 +0100

Latest INSIGHTS

Check out our latest Insights for useful accounting tips and information.

Are we unpaid tax collectors?

Business owners often refer to VAT as if it were a cost to their business regardless of their VAT position; whether they are registered for VAT or not.

If you are not registered for VAT, you do not have to add VAT to your sales and you cannot

Read More

Child Benefit for 16 – 19 year olds

More than a million parents will receive reminders to extend Child Benefit for their teenagers if they are continuing their education or training after their GCSEs.

HM Revenue and Customs (HMRC) is sending more than 1.4 million Child Benefit

Read More

Multiple Dwellings Relief for SDLT

It was announced as part of the Spring Budget 2023 that Multiple Dwellings Relief (MDR) was being abolished. This change has now come into effect for transactions which complete, or substantially perform on or after 1 June 2024.

The MDR relief

Read More