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Issue:
4931
/
Categories:
Comment & Analysis
, accounting
, basis periods
, Trading income
, Business
The basics of basis period reform: Part 1
Key points
- Basis period reform rules and changes only apply to sole traders and partners not companies.
- From the tax year 2024-25 all sole traders and partners will pay tax on the trading profits arising in the tax year – this means apportioning profits of different accounting periods.
- To calculate the amount to be included in the tax computation for 2024-25 under the new tax year basis we have to apportion the profits to find the amounts arising in 2024-25.
- For the purposes of exam questions you are always told to work to the nearest month (there is no need to worry about the five days between 31 March and 5 April).
- Any business starting to trade in 2023-24 will be subject to the new tax year basis from the outset.
- Businesses ceasing in 2023-24 will remain on old rules.
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