Tax year basis for trading profits (UK)
From the 2024–25 tax year, the tax year basis generally allocates a self-employed trader’s or trading partner’s profits to the tax year in which they arise, regardless of the business’s accounting date. Where accounts do not align with the tax year, amounts may need apportionment and estimates. Transitional rules for 2023–24 and spreading of transition profits require separate consideration. Apply the specific Finance Act and syllabus period rather than relying on an older current-year-basis rule.
Worked example
A sole trader prepares accounts to 31 December. To calculate profits arising in a tax year, the trader considers the relevant portions of the accounting periods covering that tax year, subject to the applicable rules.
Common mistake
Using the full accounting year ending in the tax year as the automatic assessment basis after the reform.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | TX (UK) | Supporting | June 2026–June 2027 |