Tax Year for the Unincorporated – Amending Estimates

From tax year 2024/25, unincorporated businesses (not limited companies) will be required to compute profits on the new ‘tax year’ basis, i.e. those between 6 April-5 April. Many businesses are considering changing the accounting period end to align with the tax year, while those that choose not to will apportion profits and may need to estimate some figures to meet the 31 January filing deadline.

A business with a 31 December accounting year end will need to include 9 months of profits from year end 31 December 2024 and 3 months from the year end 31 December 2025 in 2024/25. The results for the year ended 31 December 2025 are unlikely to have been finalised by the 2024/25 filing deadline of 31 January 2026. This will require an estimate of profits/losses as the basis for the 2024/25 tax return submission.

HMRC guidance on provisional figures currently requires businesses to make amendments to provide final figures ‘without delay’. HMRC announced that this condition will be relaxed before the start of the basis period transition year in 2023/24.

The government agreed to allow businesses to amend provisional figures by the normal time limit for making amendments. For the 2024/25 tax year this would be on or before 31 January 2027, the same filing date as the 2025/26 return.

To avoid complexity, unincorporated businesses should consider amending their accounting dates to 31 March or 5 April. The timing of this will generally be better to set to 31 March or 5 April 2024 due to the ability to spread additional profits arising over 5 tax years.

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Please contact us to discuss changing your business year end or for help with any of your tax affairs on Let’s Talk.

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