How does basis period reform affect self-employed people in 2026/27?

Full answer

Basis period reform is one of the biggest changes to self-employment taxation in decades. It replaced the 'current year basis' (profits of the accounting period ending in the tax year) with a 'tax year basis' (profits arising in the actual tax year, 6 April to 5 April). **Timeline** - Up to 2022/23: old current-year basis applied. - 2023/24: transition year -- all ongoing profits up to 5 April 2024 were taxed, with overlap relief given and any transition profit spread over up to 5 years. - From 2024/25 and 2026/27: new tax-year basis is fully in force. **Impact if your accounting year does NOT end on 31 March or 5 April** For 2026/27 you must report the profits arising between 6 April 2026 and 5 April 2027. If your accounts run to, say, 30 June, you will need to: 1. Take your accounts to 30 June 2026 and apportion them for the period 6 April 2026 to 30 June 2026 (87 days). 2. Take your accounts to 30 June 2027 and apportion for 1 July 2026 to 5 April 2027 (279 days). 3. Add both apportioned periods together. This means you are always reporting estimated figures for part of the year (since your June 2027 accounts may not be ready by the 31 January 2028 filing deadline). HMRC allows provisional figures with a subsequent amendment. **Simplification option** The cleanest fix is to change your accounting year end to 31 March or 5 April, making apportionment unnecessary. Changing year end requires notifying HMRC and possibly filing a shorter or longer set of accounts. **Cash basis** Most sole traders using the cash basis automatically align to the tax year already, since receipts and payments are recorded on cash dates. Basis period reform has minimal practical impact for them.

Related guides

• Uk Self Assessment Guide

More answers

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