Basis Period in the transitional year 2023/24 - how to use the basis period calculator

Basis Period Entries in TaxCalc (transitional year 2023/24)

This article explains the entries to make for the 2023/24 transitional year. HMRC's business manual explains the rules, if you need to familiarise yourself before starting your entries in TaxCalc.

You can either enter the adjustments manually or use the basis period calculator to:

• Automatically apportion the profits/loss into a ‘standard’ and ‘transition’ part of the basis period
• Calculate the net amount of transition profits to be spread over 5 years
• Calculate the minimum amount of transition profit to be treated as arising in the current year (can be overridden)
• Add optional additional ‘accelerated’ transition profit for the year
• Carry forward transition profits to be taxed in the next 4 years

You will find the basis period entries to make and the calculator in the SA100 in:

SimpleStep mode: Your work > Self Employment > Full Form > Basis Period  or  HMRC Forms mode: Self Employment > Full Form > Page 4 > Under box 69

SimpleStep mode: Your work > Partnership Management > Partnership - Full Form > Basis Period or HMRC Forms mode: Partnership Management > Partnership - Full Form  > Page 1 > Under box 12

What steps will I need to take in TaxCalc:

We'll use the following example to demonstrate the entries to make:

• Self-employment, usual accounts year end is 31/10
• The last year end reported on the 2022/23 return was 31/10/2022
• Net profit is £170,065
• Overlap profits brough forward £27,000
• The basis period for 2023/24 will be 01/11/2022 to 05/04/2024 (517 days) split into:
  • Standard part : 01/11/2022 to 31/10/2023 = 365 days
  • Transition part : 01/11/2023 to 05/04/2024 = 152 days

1. In Self Employment > Full Form – Details, enter:

Date your books or accounts start = 01/11/2022

Date you books or accounts are made up to = 05/04/2023 (or 31/03/2023)*

2. Import the accounts or enter income and expense amounts manually for the long accounting period
3. Enter Capital Allowances if relevant – if you use the wizard, any written down allowances calculated will allow for the long period of account
4. Go to Basis Period, you will see:

• Basis period dates will be auto-populated as 01/11/2022 to 05/04/2024
• The net business profit for tax purpose will automatically populate with £170,765

5. If you would like TaxCalc to automatically calculate the transition profits, now tick ‘Tick the box if you wish to use the basis period/overlap calculator’. If you do not tick this option, you will be able to enter the amounts manually.

The Basis Period Calculator will display the full year profit and will apportion into the standard part of the year (01/11/2022 to 31/10/2023) and the transition part of the year (01/11/2023 to 31/03/2024).

6. If overlap profits carried forward were previously recorded in TaxCalc, overlap profits brought forward will automatically be populated, otherwise overlap profits should be entered manually:

You will note that the overlap profits have been deducted from the transition part of the profits.

You will also see that the box ‘overlap relief not previously deducted on a change of accounting date’ is not available for entry and this is because it is for overlap profits that could have been claimed before due to a change of accounting date and therefore can only be claimed when there is a standard basis period only (tax year basis).

Close this screen and the Basis Period screen is displayed.

What if I want to increase the transition profit being taxed this year?

7. The next step is to determine if you want to change the amount of transition profit to be taxed in the current year. The calculator will automatically calculate 20% (1/5) of the transition profits as arising in the current year. To increase the amount of transition profit to be taxed, click on the wizard symbol next to ‘Transition profits to be spread over five years’:

The Transition Profit Calculations screen will display. Enter an amount in ‘Additional amount taxable this year (election to accelerate)’ :

You will notice that the overall transition profit has been adjusted to allow for reduced transition profit over the next four years, i.e. the additional £1,000 has reduced the transition spread amount by £250 in the following four years. Therefore, with this overpayment, next year’s portion of transition profits will be £4,350 (£17,400/4). The untaxed transition profits will be carried forward to next year.

We will be providing a summary in the subsequent four years which will provide a breakdown of transition profits and amounts already charged to tax.

We have used a basic scenario in this example to explain the concepts, but if you have different profit and/or loss scenarios, please check HMRC's Business Manual 81360  which provides extensive examples.