Worked example of basis period for 2017 and previous years.

The basis period is the time period that HMRC uses for tax. If the accounting year end doesn't match HMRC's tax year end, these periods can be different and cause profits to be taxed twice (overlap profits).

This is an example of a business that started trading on 1 November 2013 and prepares its accounts to period ending 31 October:

Using SimpleStep

1st Year (Tax Year 2013–14)

1. Browse to Your work > Self Employment.
2. Enter the whole period (not the basis period) and the turnover.

3. Go to Full form – Details. The accounts start and made up to dates get populated automatically. Complete any other applicable boxes.

4. Click on Next Step. Complete the applicable boxes on the Income and Expenses pages and click on Next step until you get to Basis Period page. Enter the basis period here.

5. Click on Next Step. This brings you to the Full Form – Basis period adjustment page.

6. Click on the wizard next to the Adjustment box

In Period to be apportioned, fill in the dates from 6 April to the end of the accounting period. These dates get populated in the Period 1 boxes and the apportioned amount gets populated in the box. If the amount needs to be deducted from the profit, then tick the box Negative.

Year 2 (Tax Year 2014–15)
This is the year in which the overlap is getting created. Profits for the period from the 1 Nov 2013 to 5 April 2014 are getting taxed twice, in year 1 and in year 2.

1. Browse to Self employment. Fill in the accounting period start and end dates.

2. Click on Next Step. Tick the box Have you already provided information about your 2014–15 profit (on last year’s return)? This will lock the Income, Expenses and Capital Allowances boxes

3. Click on Next Step until you get to Basis Period.

The basis period in year 2 would be: from the date of commencement 1 November 2013 to the accounting period end 31 October 2014.

4. Go to the Basis Period adjustment page > Click on the wizard > Tick the box to override. This will unlock the Amount box.

         Enter the Accounting period dates and the Period to be apportioned.

Year 3 (Tax year 2015–16)

Since the overlap was created in year 2, the amount of overlap profit will need to be filled in the Overlap relief brought forward box. As per the following example, the amount of profit being taxed twice is (£26,800 – £15,345) = £11,454. The overlap period is 1 November 2013 to 5 April 2014.

1. Browse to Full Form – Details. Enter the figure into the Overlap relief brought forward box.