{"id":3838,"date":"2022-06-01T10:22:42","date_gmt":"2022-06-01T09:22:42","guid":{"rendered":"https:\/\/cloud9accountingteam.co.uk\/?p=3838"},"modified":"2022-06-01T10:23:06","modified_gmt":"2022-06-01T09:23:06","slug":"should-i-change-my-accounting-date","status":"publish","type":"post","link":"https:\/\/cloud9accountingteam.co.uk\/sk\/should-i-change-my-accounting-date\/","title":{"rendered":"Should I Change My Accounting Date?"},"content":{"rendered":"<p><b><span data-contrast=\"auto\">Should I change my accounting date?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">In preparation of the introduction of MTD for income tax, which comes into effect from 6 April 2024 for unincorporated businesses and landlords with trading and property income of more than \u00a310,000 the basis period rules are being reformed.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">At present, once an unincorporated business is established, it is taxed on the current year basis. This means that the profits which are taxed for a particular tax year are those for the accounting period that ends in that tax year. For example, if an established business prepares it accounts to 30 June each year, for 2022\/23 it will be taxed on the profits for the year to 30 June 2022, as this is the year that ends in the 2022\/23 tax year.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">However, from 2024\/25 a business will be taxed on its profits for the tax year, i.e. the profits from 6 April and the start of the tax year to 5 April at the end of the tax year. Where accounts are prepared to 31 March (or to a date between 1 and 4 April), the accounting period is deemed to correspond to the tax year. If the accounts are prepared to a different date, it will be necessary to apportion the profits from two accounting periods to arrive at the profits for the tax year. For example, if accounts are prepared to 30 June each year, the profit for 2024\/25 will comprise 3\/12<\/span><span data-contrast=\"auto\">th<\/span><span data-contrast=\"auto\"> of the profits for the year to 30 June 2024 and 9\/12<\/span><span data-contrast=\"auto\">th<\/span><span data-contrast=\"auto\"> of the profit for the year to 30 June 2025. This will mean that the business will need the accounts for the year to 30 June 2025 in order to finalise their tax liability for 2024\/25. Under the current year basis they only need the accounts to 30 June 2024.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">To move from the current year basis to the tax year basis, the tax year 2023\/24 is a transitional year. In this year, the profits for the year ending in 2023\/24 are taxed, together with any profits for the period from the end of that period to 5 April 2024. If there are any overlap profits to be relieved, these will be deducted. This may result in more than 12 months\u2019 profits being taxed in 2023\/24. However, spreading relief will tax the additional profits over a five year period, unless the business elects otherwise.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">Move to a 31 March year end?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Going forward, life will be simpler if the business prepares accounts to 31 March (or to 5 April). Where the accounting date is other than 31 March, it may be beneficial to change to a 31 March accounting date ahead of the move to the tax year basis. This could be done in 2022\/23 or in the 2023\/24 transitional year.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Where the move is made in 2022\/23, the normal rules on change of accounting date apply. The first accounts to the new date must not be for a period longer than 18 months and the change must be made for commercial reasons. Notice of the change of accounting date must be given in the self-assessment tax return. Depending on how the dates work, any unrelieved overlap profit may be relieved or overlap profits may arise. Any overlap profits created on a change of accounting date will be relieved in the 2023\/24 transitional year.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Alternatively, the move to a 31 March accounting date could be made in the transitional year (2023\/24). Making the change in this year would avoid the creation of overlap profits and provide access to spreading relief.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">If a change of accounting date is not made prior to 2024\/25, it is possible to change the accounting date once the tax year basis is up and running. This will have minimal consequences and remove the need to apportion profits from two periods to arrive at the profits for the tax year.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h5>&gt;<img decoding=\"async\" class=\"emoji\" role=\"img\" draggable=\"false\" src=\"https:\/\/s.w.org\/images\/core\/emoji\/13.0.1\/svg\/2602.svg\" alt=\"\u2602\ufe0f\" \/><strong>For Help<\/strong>\u00a0with Topic above or any Accountancy help \u2013 contact us:\u00a0<a href=\"https:\/\/cloud9accountingteam.co.uk\/sk\/contact\/\" target=\"_blank\" rel=\"noopener\">Cloud 9 Accounting Team\u00a0<\/a><\/h5>\n<h5>&gt;<img decoding=\"async\" class=\"emoji\" role=\"img\" draggable=\"false\" src=\"https:\/\/s.w.org\/images\/core\/emoji\/13.0.1\/svg\/2602.svg\" alt=\"\u2602\ufe0f\" \/><strong>For<\/strong>\u00a0<strong>Answer on your Question \u2013\u00a0<\/strong>submit your question and we respond 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[&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":3839,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_templately_pack_id":"","_templately_imported_at":"","_templately_source":"","_templately_import_session_id":"","site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center 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