Basis period reform planned for 2023-24

The government is proposing to change the basis period rules from a current year to a tax year basis. The transition would take place from 2022-23 and the changes would come into effect from 2023-24. The effect would be that a business’s profit or loss for a tax year would be the profit or loss that occurs in the actual tax year itself regardless of its accounting date.

In a consultation published alongside draft legislation HMRC outlines the current rules for basis periods sets out a specific proposal to simplify them and suggests transitional rules for moving to the new system. The aim is to simplify the system before making tax digital (MTD) is implemented.

The proposal affects self-employed people partnerships trusts and estates with trading income. Unincorporated businesses that do not draw up annual accounts to 31 March or 5 April...