Trading losses and basis period reform

As of 6 April 2024 trading profits of unincorporated businesses are now assessed on a tax year basis. This ‘basis period reform’ represents a fundamental shake up of the income tax rules and has knock-on effects for many other areas of the tax system. It also has some particularly tricky transitional rules which apply for the tax year 2023-24 and beyond.

My previous articles for Taxation have looked in detail at these transitional rules and some of the wider implications of basis period reform. This article focuses on one specific area – trading losses.

Quick reminder of what is changing

Before getting into the details it’s worth a quick reminder of how basis period reform and the transitional rules work.

From 6 April 2024 the old current year basis is replaced with a new tax year basis of assessment. This breaks the link between accounting periods and...