Basis Period Reform (BPR)

MTD for ITSA and basis period reform - will it affect you?

Are you a sole trader or in a partnership? 

Do you have different accounting dates as the standard 6th April to 5th April? 

If you answered YES to both questions, some IMPORTANT changes will apply for the tax year 2023-24.

The “Basis Period Reform” (‘BPR’) will apply to you.

Any sole trader or partnership that does not have an accounting period ending between 31st March and 5th April (including 31st March and 5th April) will need to change the way they calculate their business profits for their 2023/24 tax return (and going forward).

If you have an accounting period ending between 31st March and 5th April then you may be affected in the 2023/24 tax year if you have unused overlap relief but on the whole these could be treated as ending on the 5th April.

The Basis Period Reform (BPR) means that all self-employed individuals and partnerships are required to report their financial data to HMRC on tax year basis (6th April to 5th April) regardless of what their accounting period was.  This means that from 06/04/2024 all business profits being assessed and taxed will be in the year that they happen.  By doing so, businesses will also fall in line with rules governing ‘Making Tax Digital for Income Tax’ that commence in April 2026.

The 2023 to 2024 tax year is known as the ‘transition year’ where affected businesses begin the transition towards having taxable profits and losses adjusted to align with the new “tax year” period. To accomplish this transition, profits for the period immediately following your normal 2022-23 accounting year end up to 5 April 2024 will need to be reported in your Self-Assessment tax return.

Because of this:

  • you will end up reporting profits that cover more than one year;
  • you may need to prepare two 2 sets of accounts in order to estimate your profits for the financial year.

So, if your business does not have an accounting date from 31st March to 5th April, then the 2023/24 tax return will mark the transition period for your accounting period to align with the tax year.

Let Taxfile do your bookkeeping for you. Supply us with your bank statements for the relevant period — we can then ensure you only pay the right amount of tax.

Give us a call on 020 8761 8000 for a free no obligations 20-minute consultation.