Sarah Bradford explains how the profits of an unincorporated business are calculated for the 2023/24 tax year following the new basis period rules.
The way in which unincorporated businesses, such as sole traders and partnerships, compute their taxable profits for a tax year changed to the tax year basis from 2024/25. For 2022/23 and previous years, profits were assessed on a current year basis by reference to the profits for the accounting period ending in the tax year (subject to commencement and cessation rules).
To move from the current year basis to the tax year basis, the tax year 2023/24 was a transitional year. This has come to an end, and you may now be computing clients’ profits for 2023/24 and completing their 2023/24 tax returns. As the 31 July payment on account deadline approaches, clients may also want to know whether their profits have fallen so they can reduce their payments on account.
