We explain basis period reform in plain English, handle it correctly, and make sure you claim every relief you are entitled to, all at a fixed fee.
Basis Period Reform
Basis period reform changed how self-employed profits are taxed, moving everyone to a tax-year basis, where you are taxed on the profits arising in the tax year, which particularly affected businesses that do not have a 5 April year end.
We handle the transition to the tax-year basis, deal with any overlap relief you had built up, spread any transition profit correctly, and, where helpful, advise on changing your accounting date, so the reform does not cost you more than it should.
Businesses with a year end other than 31 March or 5 April were most affected by the reform, potentially being taxed on more than a year's profit in the transition, though overlap relief and spreading soften the impact.
The Detail That Matters
Basis period reform moved the self-employed onto a tax-year basis, taxing the profits that arise in the tax year regardless of your accounting date. It mainly affected businesses without a 5 April year end, and using overlap relief and spreading softens the impact.
From 2024/25, self-employed profits are taxed by tax year (6 April to 5 April), not by your accounting period. Businesses with a 31 March or 5 April year end are largely unaffected; others faced a transition.
Businesses with a different year end could be taxed on more than a year's profit in the transition, but overlap relief, profit taxed twice in the early years under the old rules, is used to reduce the transition profit.
Where the transition still created extra taxable profit, it can be spread over up to five years, easing the impact on your tax and cash flow rather than taking it all in one year.
For some, aligning the accounting date with the tax year simplifies matters going forward. We advise whether that is worthwhile and handle the transition correctly.
The reform caught out businesses with non-standard year ends, sometimes accelerating tax; the key protections, overlap relief and the five-year spreading, are easy to under-use, leaving people overpaying.
Key Figures
How We Help
We move you correctly onto the tax-year basis, where you are taxed on the profits of the tax year regardless of your accounting date.
We use any overlap relief you built up in earlier years to reduce the transition profit, so you are not taxed twice on the same income.
Where the transition created extra taxable profit, we spread it over up to five years as allowed, easing the impact on your tax.
All the forms, calculations and correspondence handled on your behalf, so you never have to decode HMRC's rules or sit on hold.
A clear fixed fee quoted after a free call, your position explained in plain English, and never a surprise bill.
We act quickly, and where earlier years are involved we put those right too, reclaiming refunds or minimising penalties.
Basis period reform caught out many businesses with non-standard year ends, sometimes accelerating tax. Using overlap relief and the spreading rules, and considering a change of accounting date, is where the impact is managed.
Recent Client Outcome
A business with a 30 April year end faced being taxed on well over a year's profit in the transition to the tax-year basis.
What we did. We applied the overlap relief they had carried since starting, spread the remaining transition profit over the allowed period, and considered aligning their accounting date.
The outcome. The overlap relief and spreading sharply reduced the extra tax the transition would otherwise have caused, keeping it manageable.
Using the reliefs the reform provides, rather than simply absorbing the transition, protected their cash flow.
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Questions Answered
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