BIM81201 | Tax year basis: profits arising in the tax year 2024-25 and onwards

These rules will apply from the tax year 2024-25 onwards.

S7A-D ITTOIA 2005

For the 2024-25 tax year onwards basis period rules will not apply, and an individual will instead be taxed on the profits arising in the tax year. Where a person carrying on a trade prepares their accounts for a period that does not coincide with a tax year, it may be necessary to add or apportion the profits or losses of one or more periods of account to work out the profits or losses for the tax year.

Any apportionment that is necessary should generally be made in proportion to the number of days in the relevant periods.

An alternative time-apportionment basis suggested by the taxpayer can be accepted if it is reasonable and is applied consistently. An example might be time-apportionment by reference to the number of weeks or months in the relevant periods.

More unusually, there may be circumstances in which an apportionment is not necessary because a more accurate measure of the profit or loss arising in any period can be obtained by reference to the actual transactions which took place during that period - see Marshall Hus & Partners Ltd v Bolton [1980] 55 TC 539. Normally this will only be the case where there are relatively few identifiable transactions.

Apportioning losses to tax years follows the same rules as for profits.

In some circumstances, an individual may be unable to finalise the figures that need to be included in their Self Assessment tax return by the filing date. They may need to submit provisional figures. See SALF206 for guidance on submitting provisional figures.
For details of how basis period rules apply to years before 2024-25, see BIM81010.

Special ‘transitional’ rules apply for 2023-24 to trades commencing before that year: these are covered at BIM81250. For trades commencing in 2023-24 see BIM81260.

Example 1: 12-month accounts, taxable profits each year

A business commences on 1 October 2025. The first accounts are made up for 12 months to 30 September 2026 and show a profit of £45,000. The second accounts are made up for 12 months to 30 September 2027 and show a profit of £75,000.

If the profits are computed by an apportionment using the number of days in the relevant periods, the taxable profits for the first two tax years are:

Example 2: 12-month accounts, mix of taxable profits and losses

A business commences on 1 January 2026. The first accounts are made up for 12 months to 31 December 2026 and show a profit of £50,000. The second accounts are made up for 12 months to 31 December 2027 and show a loss of £15,000.

If the profits and losses are computed by an apportionment using the number of days in the relevant periods, the taxable profits for the first two tax years are: