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New guidance from HMRC explains how to calculate the transition profit for 2023-24 for taxpayers affected by basis period reform.
The guidance covers identifying and then apportioning the ‘standard’ and ‘transition’ parts of the basis period. HMRC gives an example of preparing accounts to 31 December each year: the standard part would run from 1 January to 31 December 2023 and the transition part from 1 January to 5 April 2024.
It then explains how to work out how much of the transition profit - after the deduction of overlap relief - should be taxed in 2023-24. The remainder is spread over the following four tax years ending with the year 2027-28.
HMRC will publish a new tool in April 2024 to help with the calculation of transition profit.
