Blog > Basis period reform
The information on this page is for general guidance and should not be relied upon as definitive advice, since individual circumstances may vary. See disclaimer.
Sole traders
Self-employed businesses
Individual partners in a partnership
Other unincorporated entities with trading income
From the tax year 6 April 2024 to 5 April 2025, the period that an individual calculates its taxable business profit (or loss) on their income tax return will change from the business’s own accounting period to the tax year.
Businesses whose accounting period is the same as the tax year, will see no change as they already calculate profit (or loss) for tax based on the tax year.
Businesses with an accounting period that does not align with the tax year, will need to calculate taxable profit (or loss) for tax based on the time-apportioned profit (or loss) for tax for the two accounting periods that fall in the tax year. Examples are provided in https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim81201.
This should not require any change as taxable profit (or loss) will already be based on the tax year.
It is not mandatory to change it, but you may wish to do so to simplify the calculation of your taxable business profit (or loss) on your income tax return.
You can change your accounting period to align with the tax year by changing the year-end date of your current accounting period to 5 April.
*Or 31 March, see below.
Yes. You can change your accounting period to end on 31 March rather than 5 April. This is treated as if the accounting period aligns with the tax year.
You need to prepare your next accounts for the new period, then declare your accounting period start and end dates in the relevant boxes on your income tax return.
To change your current year-end to 31 March:
At the bottom of the screen there is a year-end caption, which displays the current year. Click on this and select Year Ends.
Select the current year-end
Select Properties
Enter the new Year end date as 31 March
Click OK
When you run the profit and loss report (Display > Profit and loss account) or export the profit and loss report for your tax package (MTD and Tax Data > Send to tax package), the data will cover the period from the start date of your original accounting period to 31 March.
The period after that will then run from 1 April to 31 March, when you click on the year-end caption and select Next.
You can still prepare accounts for your existing accounting period. However, for your income tax return you need to declare the taxable profit (or loss) for the tax year rather than your accounting period.
This is calculated by taking the taxable profit (or loss) for each of your two accounting periods that fall in the tax year, and apportioning the total by the number of days each period falls in the tax year. You then need to make an adjustment between this figure, and the taxable profit (or loss) figure based on your latest accounting period. This adjustment is outside the scope of VT's programs as it is made on your self-assessment tax return (box 68 (2)).
To avoid the need for this adjustment, businesses may want to change their accounting period to align with the tax year to simplify how they determine taxable profit (or loss).
(1) Examples of this calculation are provided at https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim81201.
(2) Or in the MTD software used to submit your final declaration of income tax if you come under the scope of MTD for Income Tax - see How will basis period reform link to Making Tax Digital for Income Tax? below.
The net profit (or loss) after:
Capital allowances
Goods and services for your own use
Non-taxable transactions
for each accounting period that falls in a tax year.
This figure is referred to as ‘net business profit/loss for tax purposes’ on the income tax return.
In general, it will be much simpler to align your accounting period with your tax year so that you do not need to apportion two sets of accounts to arrive at your profit (or loss) for tax figure. However, there may be practical reasons against changing the period. Some of these practical issues are discussed in the section Practical Issues of the following article from TaxAdviser magazine: Basis period reform: moving to a 31 March year-end.
The basis period change should not change how you:
enter transactions in VT Transaction+/VT Cash Book, or
obtain profit and loss data from VT Transaction+/VT Cash Book for your tax return (unless you come under the MTD for income tax requirements from April 2026)
What will change is the profit (or loss) for tax figure you declare on your income tax return, if your accounting period does not align with the tax year. This figure should be the time-apportioned profit (or loss) for tax, for the two accounting periods that fall in the tax year. The calculation of this figure and completion of a tax return is outside the scope of VT's programs.
You will therefore need to obtain profit and loss data from VT Transaction+/VT Cash Book for the two accounting periods that fall in the tax year to derive these figures. Obtaining profit and loss data is done in the same way as before (i.e selecting the accounting period in the year-end caption at the bottom of the screen, then selecting Display > Profit and Loss Account (or if you export data to a tax package, selecting MTD and Tax Data > Send to tax package).
The HMRC guidance https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim81201 provides examples of the apportionment calculation.
Guidance on completing the Employment pages of a tax return are provided at https://www.gov.uk/government/publications/self-assessment-employment-sa102.
Guidance on completing the Partnership pages of a tax return are provided at. https://www.gov.uk/government/publications/self-assessment-partnership-full-sa104f.
The requirements of MTD for Income Tax are explained on the Making Tax Digital for Income Tax page.
Basis period reform only has an impact if your accounting period does not align with the tax year.
If this is the case, then as described earlier, your taxable profit/loss should be declared for the tax year, not your accounting period. The taxable profit/loss for the tax year is the time apportioned figure for the two accounting periods that fall in the tax year.
If you come under the Making Tax Digital for Tax requirements, the quarterly submissions of income and expenditure should be for the transactions accounted for in the quarters and not apportioned amounts. The calculation of taxable profit or loss is derived from the quarterly amounts and therefore will not initially represent the time-apportioned taxable profit or loss. To overcome this, you will need to make an adjustment between the initial calculation of taxable profit or loss, and the time apportioned figure. This adjustment is outside the scope of VT's programs as it is made in the MTD software used to submit your final declaration of income tax.
