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Basis Period Reform

MARCH 2022

The ‘current year basis’ of taxation will change to a ‘tax year basis’ with effect from the tax year 2024 to 2025.

In the coming months, we will be talking to all clients who have a year-end (‘accounting date’) that IS NOT 31st March or 5th April. If this is you, and you’d like to speak to us sooner about basis period reform, please let us know on

These conversations are in advance of the 2023-24 tax year which is a transition year for the basis period reform, which will affect self-employed traders, trading partnerships and trusts, and non-resident companies with trading income.

What is the basis period reform?

This measure changes the way trading income is allocated to tax years. Generally, businesses draw up annual accounts to the same date each year, called their ‘accounting date’. Currently, a business’s profit or loss for a tax year is usually the profit or loss for the year up to the accounting date in the tax year, called the ‘basis period’. Specific rules determine the basis period in certain cases, including during the early years of trading. These rules can create overlapping basis periods, which charge tax on profits twice and generate corresponding ‘overlap relief’ which is usually given on cessation of the business.

The reform aims to create a simpler, fairer and more transparent set of rules for the allocation of trading income to tax years. At present, two businesses that are identical except for their accounting date may have very different taxable profits for a tax year. The tax year basis will remove this difference, leading to fairer outcomes between businesses.

You can read more, including background to the measure and a summary of its impacts now by clicking here.

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