In Basis period, for example if a trader commence trading on 1st sept 20x1 and prepared his account to 31st dec 20x1 the same year . Which is 4 months ( i.e the length of the Accounting period) .how the to solve it using the first year rule ? If he has trading profits for ex.
Period to 31st dec 20x1. £ 10000
Year ended 31st dec 20x2. £ 30000
Year ended 31st dec 20x3. £ 40000
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Basis period 1st year rule
In the first year of trade ie x1/x2 he wll be taxed on an actual basis - what he actually earned in the period from commencement to the next 5th April. 7 months profits. These profits will be taken from the first and second set of financial accounts.
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