Basis period (old rules) ― normal years

Produced by a Tolley Owner-Managed Businesses expert

Owner-Managed Businesses

Guidance

The allocation of accounting profits to basis periods for tax purposes is repealed from the tax year 2024/25 and replaced by a tax year basis. The rules which apply for the tax year 2024/25 onwards are set out in the Tax year basis from 2024/25 onwards guidance note and the rules for the transitional tax year of 2023/24 including businesses starting in 2023/24 are set out in the Basis period transitional rules 2023/24 guidance note. The details below therefore only apply for tax years up to and including 2022/23.

Current year basis

The usual basis for taxation of sole trader profits is known as the ‘current year basis’. This means that in respect of a year in which the trade is continuing, which is not the year of commencement or cessation, the profits to be taxed are those relating to the accounting period ending in that year.

For example, assume

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