Basis period reform
An individual’s business profits will be taxed on a tax year basis from 2024-25 onwards. Previously they were taxed by reference to their basis period.
The move from basis periods to the tax year basis
2023-24 is a transition year and the process for moving from basis periods to the tax year basis can be complicated where:
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the business commenced in 2022-23 or earlier;
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2023-24 was not a year of cessation; and
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its accounts are prepared to a date other than 5 April (or 31 March-4 April which is treated as 5 April)
In this scenario, an individual’s taxable profits for 2023-24 are comprised of:
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a standard part - the 12 months following the end of the basis period for 2022-23; and
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a transition part - the period beginning with the end of the standard part and ending on 5 April 2024
Any brought forward overlap profits are deducted from the transition part profit or loss.
The remaining amount, if positive and reduced by any loss from the standard part, is spread over 5 years unless an election is made to spread it over fewer years.
Entering information into Personal Tax for 2023-24
Where the profits of a business comprise of a standard part and a transition part:
Self employments
For self-employments, details of the standard part should be entered to arrive at the Profit/(loss) before adjustments figure and then details of the transition part should be entered at Adjustments.
Partnerships
For partnerships, at Partnership Statement - Trading Profits and Losses, enter the figures from box 11 or 12 on the Partnership Statement on the Partnership Tax Return form.
You may need to adjust the figures by entering a basis period adjustment to arrive at the standard part profit and report the transition part profit or loss in the provided boxes.