Basis Period Transition when more than one accounting period

How should I enter details of multiple accounting periods for a self employment?

From tax year 2024-25 onwards, self-employed individuals will be taxed on the profits that arise in the tax year that runs from 6 April to the following 5 April (the tax year basis). This replaces the previous current year basis of taxation, which applied up to the 2022-23 tax year, where individuals were taxed based on the accounts that ended in the tax year.

For individuals that prepare accounts to 5 April each year, or to a date between 31 March and 5 April, the taxable profits will be based on the annual accounts that are prepared in line with the tax year. For example, an individual preparing accounts to 31 March each year will be taxed in the 2024-25 tax year based on the accounts for the year ending 31 March 2025.

Where individuals prepare accounts to a date which is not between 31 March and 5 April, it will be necessary to apportion profits or losses from two sets of accounts to calculate the taxable profits for the tax year.

The 2023-24 tax year is a transitional year in which any profits or losses from the end of the 2022-23 basis period up to 5 April 2024 will be brought into account. It is possible that two sets of accounts may have been prepared for the 2023-24 tax year when changing accounting date to align with the tax year.

Please see our knowledgebase article Basis period transition for partners for information on how to deal with accounting periods in the SA800 and basis period adjustment entries in the partnership pages (SA104) of the SA100.

HMRC guidance where there is more than one set of accounts for the tax year

HMRC’s published workaround for an individual return with more than one accounting period is as follows;

“Where there is more than one set of accounts for 2023-24, separate Self Employment pages should be completed for each set of accounts. One set of Self Employment pages should be completed with details of the latest accounting period and FSE66 to FSE82 as appropriate, should be completed to arrive at the taxable profit for the basis period. Additional Self Employment pages for any other accounting periods should be submitted as an attachment with an explanation given in white space (additional information). Note: that where the pages do not include the full details of profits, expenses necessary to confirm the net profit the return does not satisfy the requirements of Section 8 TMA1970.”

For tax returns that are to be filed online;

• One set of self-employment supplementary pages should be included in the electronic return, which should be for the latest accounting period
• The basis period adjustments should be completed on that set of supplementary pages to ensure the correct overall profit or loss for the tax year is reported
• For the 2023-24 tax year, the adjustments entered also need to ensure that the standard and transition part profits or losses are correctly calculated
• PDF copies should be created for any additional Self-employment pages (where there are earlier accounting periods ending in the tax year) and submitted with the return

How do I complete the entries using TaxCalc?

The following example is used to demonstrate the process using TaxCalc.

A self-employed trader prepares accounts to 31 December each year.

The basis period for the 2023-24 tax year runs from 1 January 2023 to 5 April 2024. One set of accounts is prepared for the year to 31 December 2023 and a separate set of accounts is prepared for the three months from 1 January 2024 to 31 March 2024.

Step 1 – Prepare self-employment pages for the first accounting period

For our example, this is the accounting period 1 January 2023 to 31 December 2023.

Enter the Accounting Period start and end dates on the first Self Employment screen in Simple Step. Once you have entered the Accounting Period dates, an additional section will be displayed on screen entitled Basis period reform – more than one set of accounts for 2023-24 for the same business.

Select the third option ‘This is the earlier accounting period for this self-employment for 2023-24 (which will be added as a PDF attachment to the return)’ A message will be displayed advising you that any amounts already entered in respect of basis period adjustments, use of losses or other income will be cleared as these items should only be entered on the latest set of pages.

Enter details of income, expenditure and capital allowances for the first accounting period. Ensure that details entered only relate to the first accounting period, in our example this is the year to 31 December 2023. Complete the Balance Sheet information for page 5 of the full return if required.  You may import details from TaxCalc Accounts Production if you have created the accounts for the relevant period.

You will note that when the ‘earlier accounting period’ option is selected, any boxes relating to basis period adjustments, use of losses or other income will be locked as these should only be entered on the second set of Self Employment pages.

Step 2 – Create the self-employment pages for the second accounting period

Another set of self-employment pages should be created for the second accounting period.  For our example this is the period 1 January 2024 to 31 March 2024.  You can create these by clicking the Add button on the Self Employment screen from the first accounting period.

Ensure that you enter the Accounting Period start and end dates correctly on the Self Employment screen (in our example this is 1 January 2024 to 31 March 2024) and ensure that the second option is selected ‘This is the latest accounting period for this self employment for 2023-24 (which will be included as part of the tax return submission, including any relevant basis period adjustments)’.

Check that the Self Employment pages for the first accounting period are selected as the Linked self-employment pages.  Details of the linked pages are displayed on screen. Linking the ‘latest’ and ‘earlier’ sets of pages will ensure that TaxCalc calculates the necessary adjustments and includes the correct pages with the tax return.

Income, expenditure and capital allowances entered should be for the second accounting period only. You may import details from TaxCalc Accounts Production if you have created the accounts for the relevant period.  If you have any capital allowance pool values carried forward from the first accounting period, these will need to be entered as brought forward balances in the second accounting period.

Step 3 – Enter the correct basis period adjustments

Ensure that the correct basis period start and end dates are entered in the second set of Self Employment pages.  These are either entered on the Basis Period screen in Simple Step or on Page 4 of the Self Employment pages in HMRC Forms mode. For our example these are 01/01/2023 and 05/04/2024.

The adjustment entered in box 68 should be an amount which, when added to the net business profit or loss per the second accounting period, gives the correct overall profit or loss for the standard part of the basis period.

The amount entered in box 73.1 should be the calculated profit or loss of the transition part of the basis period.

The Basis period calculator wizard can be used to assist with calculating the required adjustment in box 68 and transition profit or loss to be included in box 73.1.

To use the Basis period calculator wizard, select the option ‘Tick the box if you wish to use the basis period/overlap calculator’, either from the Basis Period screen in Simple Step or from Page 4 of the Self-employment pages in HMRC Forms mode.

Within the Basis period calculator wizard, details for the second accounting period will automatically be displayed. Details from the first accounting period will also automatically be included using the ‘Accounting period ending before the main accounting period’ boxes. In our example this is the period 01/01/2023 to 31/12/2023.

The Basis period calculator will automatically calculate the standard and transition part profit or loss and any necessary adjustment for inclusion in box 68.

Step 4 – Check and submit your return

After completing the steps above you will note that TaxCalc has automatically configured the following to prepare your return ready for submission:

• On the SA100 Attachments screen you can view the PDF copy of the Self Employment pages for the first accounting period has been created and attached.
• The overall adjusted profit for the second (latest) set of Self Employment pages (including any relevant basis period adjustment) is included on the SA302 Summary.
• Explanatory text has automatically been added to the ‘Any other information box’ on the final page of the second set of Self Employment pages to explain that a PDF copy of the pages for the first accounting period has been attached, referencing HMRC special ID 8.