In this week’s Q&A, Croner-i tax adviser David Lawson, explains how to calculate profits and tax liability during the transitionary basis period
I have a sole trader with a basis period ended 30 June, profits for 30 June 23 are going to be £80,000 and forecasted profits for 30 June 2024 are £60,000. This means there are overlap profits brought forward of £20,000. Can you explain the profits calculation and collection of the additional tax under the basis period reform?
For the 2024-25 tax year, sole traders and individual partners will have a basis period in line with the tax year, Sch. 1, para 61, Finance Act 2022 (FA 2022).
There is a transitional period in the 2023-24 tax year to bring the basis period in line with the tax years for existing sole traders, partnerships who have not commenced the trade or ceased in the year.
