If you are a sole trader, from 6 April 2024 onwards you will pay tax on your profits for the tax year regardless of the date to which you prepare your accounts. If you do not prepare your accounts to 31 March or 5 April (or a date in between) you will need to apportion the profits from two accounting periods to arrive at your profit for the tax year.

To move to the tax year basis, the 2023/24 tax year is a transitional year. If you do not have an accounting date that falls between 31 March and 5 April inclusive, you will be taxed on more than 12 months’ worth of profits for that year. However, to prevent a very high tax bill in 2023/24, the profits for the period from your accounting date in the 2023/24 tax year to 5 April 2024 are taxed over five tax years unless you elect otherwise.

In the early years of your business or on a change of accounting date, you may have had profits that were taxed twice because of the way that the previous basis period rules worked. If relief has not been given for these profits, it must be claimed in 2023/24 or it will be lost.

The rules governing the move to the tax year basis and relief for overlap profits are complicated. We can help you understand what this means for your tax bill and ensure that you benefit from any overlap relief to which you are entitled. Contact us at enquiries@ardury.co.uk to discuss further.