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The allocation of accounting profits to basis periods for tax purposes was reformed by FA 2022, s 7, Sch 1 and ITTOIA 2005, ss 196–220 (Ch 15) is repealed from the tax year 2024/25. The rules which apply for the tax year 2024/25 onwards are set out in B8.101A and the rules for the transitional tax year of 2023/24 including businesses starting in 2023/24 are set out in B8.101B. The details below therefore only apply for tax years up to and including 2022/23.

There are special basis periods for the early years of trading (ie the first two, or sometimes three, years). After that, the basis period rules for continuing trades applied, as detailed in B8.103.

In summary the early year basis periods are as follows¹:

1. Ìý

   •ÌýÌýÌýÌý first tax year — from the date of commencement of trade to the following 5 April

2. Ìý

   •ÌýÌýÌýÌý second tax year — the rules are more complex, to take into account the various scenarios that may apply, as follows:

3. 1. Ìý

      •