Basis period (old rules) ― opening years

Produced by a Tolley Owner-Managed Businesses expert

Owner-Managed Businesses

Guidance

The allocation of accounting profits to basis periods for tax purposes was reformed by FA 2022, s 7, Sch 1 and replaced with a tax year basis from the tax year 2024/25. 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.

The first year

For the first tax year in which somebody is trading, the basis period is from the date the trade started to the following 5 April.

As an example, if the trade started on 1 January 2019 (ie in 2018/19), then the first basis period is from 1 January 2019 to 5 April 2019. Profits accruing in this period will be subject to tax in the tax year 2018/19.

The second year

If there is

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