Sole trader - Basis periods

Question 1

When are the transitional basis periods relevant?

Answer 1

If started trade before 23/24 AND accounting period does not = tax year

Question 2

When are the new basis periods relevant?

Answer 2

If began to trade in 23/24, just tax start 05/04/2024

Question 3

What is step 1?

Answer 3

Calculate the profit/loss of the ‘standard’ part of the basis period

Question 4

What is the standard part of the basis period?

Answer 4

The profits of the accounting period that has ended in the tax year

Question 5

What is step 2?

Answer 5

Calculate the profit/loss of the ‘transition’ part of the basis period?

Question 6

How do you calculate the profit/loss of the ‘transition’ part?

Answer 6

Pro rate profits after the standard part to get to 1.4.24

Question 7

What is step 3?

Answer 7

Deduct overlap profits from the transition part from step 2

Question 8

What is step 4?

Answer 8

Add step 1 and step 3.
If step 3 or 4 is a loss, then that is the profit/loss for the basis period.
If not, continue onward.

Question 9

What is step 5?

Answer 9

Calculate the amount of total transition profit, which is the lower of:
- Step 3 ; and
- Step 4
- Then divide this by 5 to get the yearly payment.

Question 10

What is step 6?

Answer 10

2023/24 taxable profit = Step 1 plus step 5 ; or
Step 5 if step 1 was a loss.