Basis period calculator

Calculate your basis period in a few simple steps.

Most sole traders and freelancers know that the tax year runs from 6 April to 5 April the following year, so they assume that they’ll be taxed on their profits from 6 April to 5 April. But that’s not always the case

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Everything you need to know about basis period.
What is a basis period for tax?

A basis period is the time period for which a sole trader or partnership pays tax each year. For most businesses their basis period aligns with the tax year because they chose an accounting period that ends between 31 March or 5 April (which are treated the same by HMRC for Income Tax purposes).

If basis periods align with the tax year this means that in the 2021/22 tax year you would be taxed on the profits arising in the period 6 April 2021 - 5 April 2022. That sounds simple, right?

Not always, because basis periods don’t always align with the tax year so nicely. Why? The most common reasons are:

  • You are a new business
  • You have chosen a different accounting year end - such as 31 December, for example

Where this is the case you’ll need to work out which profits are allocated to which tax year using the basis period rules. It also normally means you pay tax twice on a portion of your profits under the basis period rules. You won’t receive relief for this double tax until you cease trading or align your accounting date with the tax years - so it’s something to consider when you’re getting started.

Once you’ve reached your third year of trading you are normally on what is known as the Current Year Basis rule. This means that you’ll be taxed on the profits for the 12 months to the accounting date that ends in that tax year.

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