Basis Period Reform – What You Need to Know

The UK tax landscape is always transforming! It’s important to keep up to date on the changes which will affect you.

If you are self employed and operate as a sole trader or in partnership, be aware of the  basis period rules. These rules have been in place since   6 April 2023 and will ultimately shift the way in which your profits are reported.

Avoid Costly Inaccuracies

Submitting an inaccurate return can also be costly. Make sure its right first time is key to avoiding those penalties.

What were the rules prior to 6 April 2023?

The basis period rules pre 6 April 2023 were well established; and relatively easy to understand.

Your profits for the tax year were based on the accounting year which ended in that relevant tax year. So for example, if Mr Baker had a 31 December year end and has tax-adjusted profits of £10,000 for the year ended 31 December 2022, those profits were reportable in full in the 2022/23 tax year as the accounting period ended between 6 April 2022 and 5 April 2023.

What are the rules now?

Since 6 April 2023, profits must be reported up to the tax year end. Even if the accounting period ends on a different date.

Profits may need to be apportioned between different accounting periods and profits reported may cover more than one accounting year.

The Transition Year                  

What if my accounting period ends between 31 March and 4 April?

You have the flexibility to treat it as if it ends on 5 April. This allows you to report profits without the need for apportionment for the five days after 31 March.

Summary

You should consider whether you will be impacted by these changes and if so it’s effect on your cash flow.

Want to avoid additional administrative burden? Look at changing your accounting year-end to align with the tax year end.

Next Steps

Do you want to understand in more detail the basic period reform? Please get in touch and our tax expert will be happy to assist you.

[1] Under the current rules for determining which profits of an unincorporated business are taxed in a particular tax year. Some profits may fall to be taxed twice in the opening years of a business. These profits are known as overlap profits.

*updated 19/02/2026 original 2023/09/19