03333 444 171

What are the Basis Period Reform changes?

New rules dictate that from 2024/25, all unincorporated businesses will be taxed on the profits generated between the start and end of the tax year, from 6 April to 5 April. This will apply regardless of the actual year-end that the business prepares its accounts to. This is known as the Basis Period Reform (BPR).

2023/24 will be a transitional year before the changes take effect. Businesses with accounting dates other than 31 March or 5 April will need to pro-rata their results to the tax year. As a result of this, some businesses may need to use provisional figures when filing their tax returns.

HMRC have confirmed that provisional figures can be amended within normal time limits instead of ‘without delay’. This will affect individuals, partnerships, trusts, as well as others subject to Income Tax on trading income.

In order to avoid the need to use provisional figures and to simplify the process, it is HMRCs hope that many businesses will amend their accounting date to 31 March going forward. But there are other things to consider before making this change, particularly for international businesses where it may not be feasible to change from a 31 December year-end.

The impact will be felt by those that prepare accounts with a later date in the tax year. For example, if a business has a 31 December year-end, they currently have 13 months to finalise their figure, but going forwards they will only have 1 month. As an example, in 2024/25, where the filing deadline is 31 January 2026, they will be assessed on 9 months from the year ended 31 December 2024 and 3 months from the year ended 31 December 2025.

If you do not change your current year-end date, there will be additional administrative burdens and professional costs, more so for large partnerships, where in addition to the partnership, an amendment will be required for every individual partner. Another thing to consider is the potential of an interest charge that could occur if the estimated figures are lower than the final figures.

What should you consider for BPR going forward?

Is changing the accounting date suitable? Can better preparation planning help with your tax return? What are the cashflow implications of the reforms?

SFB can help you with the new requirements and impacts of the BPR reforms to ensure you are fully compliant. To discuss this upcoming change and the most appropriate option for you, please contact us on 03333 444 171 or enquiries@sfb.group.