Work out your transition profit
How to work out your transition profit for the 2023 to 2024 tax year if you are affected by the new tax year basis (Basis Period Reform).
Before working out your transition profit, get your Overlap Relief figure.
If your business accounting year end has always matched the tax year (is on or between 31 March and 5 April) you will not have any transition profit.
You can prepare accounts to any date in the year, but you may find it easier to prepare your accounts to 31 March or 5 April from 2024 onwards. This may make completing your tax return simpler as you will not need to use 2 sets of accounts.
Work out your transition profit
You will be taxed in 2023 to 2024 on the profits of the ‘standard part’ and the ‘transition part’ of your basis period.
Standard part
Your standard part is the 12 month period beginning immediately after the end of your basis period for tax year 2022 to 2023.
This will normally have been your accounting period in 2022 to 2023.
Transition part
Your transition part begins immediately after the end of the standard part. It ends on 5 April 2024, or on your accounting date in 2023 to 2024 if it is on or between 31 March and 4 April 2024.
For example, you prepare accounts to 31 December each year. Your standard part runs from 1 January to 31 December 2023 and your transition part runs from 1 January to 5 April 2024.
Apportioning profits to the standard part and the transition part
You need to report the profits you earned in each part of your basis period.
If your accounts match the part exactly you can report the profit as normal.
If not, you need to report parts of the profit from multiple sets of accounts.
For example, if you have an accounting year end date of 31 December, you will report profit from both:
- 1 January 2023 to 31 December 2023 for your standard part
- 1 January 2024 to 5 April 2024 for your transition part
The normal method of apportioning profits is by looking at the number of days in each of the accounting periods in the parts of the basis period.
You can use another method if it is reasonable, and you use it consistently. For example, you can apportion by months or weeks.
If your accounting period or part of the basis period covers the end of February 2024, remember to include 29 February when working out your taxable profit.
Example of how to apportion by days
A business prepares accounts for:
- 1 October 2022 to 30 September 2023, showing profit of £45,000
- 1 October 2023 to 30 September 2024, showing profit of £75,000
Standard part
Taking into account profit from 1 October 2022 to 30 September 2023, the business has a taxable profit of £45,000 for the standard part.
Transition part
Taking into account profit from 1 October 2023 to 5 April 2024:
Profit (£75,000) × the number of days in the transition part (188) ÷ the number of days in the accounting period (366).
This equals a taxable profit of £38,525 for the transition part.
Example of how to apportion by months
A business prepares accounts for:
- 1 January 2023 to 31 December 2023, showing profit of £50,000
- 1 January 2024 to 31 December 2024, showing profit of £15,000
Standard part
Taking into account profit from 1 January 2023 to 31 December 2023, the business has a taxable profit of £50,000 for the standard part.
Transition part
Taking into account profit from 1 January 2024 to 5 April 2024:
Profit (£15,000) × the number of months in the transition part (3) ÷ the number of months in the accounting period (12).
This equals a taxable profit of £3,750 for the transition part.
Deduct your Overlap Relief
The profits of the parts are your ‘standard profit’ and your ‘transition profit’. Your standard profit will be taxed as normal. If you have a standard loss this will reduce your transition profit.
You should deduct any Overlap Relief from your transition profit.
Work out how much of your transition profit after Overlap Relief to tax in 2023 to 2024
Your transition profit after Overlap Relief will be spread over 5 years, starting with the tax year 2023 to 2024 and ending with the tax year 2027 to 2028.
There are boxes on your Self Assessment tax return where you should report:
- your transition profit
- your Overlap Relief
- how much of your transition profit after Overlap Relief should be taxed in 2023 to 2024
At least 20% of your transition profit after Overlap Relief must be taxed in 2023 to 2024. If you want more of your transition profit after Overlap Relief to be taxed in 2023 to 2024, enter the higher amount on your 2023 to 2024 tax return and use the ‘Any other information’ box to explain this.
Your remaining transition profit after Overlap Relief will be spread equally over the remaining 4 years. You should keep a record of this to help you complete your tax returns for later tax years.
If your business ceases on or before 5 April 2027, any transition profit after Overlap Relief that has not yet been taxed must be taxed in the year your business ceased.
If you are a farmer or creative artist, transition profit should not be included when calculating your averaging adjustment.
Get help to work out your transition profit
If you are self employed, you can get help to work out your transition profit and other figures you will need to complete your 2023 to 2024 tax return.
Before you start
You will need details of:
- your overlap relief amount
- your accounts for any accounting period that falls partly or wholly within the period from the end of your 2022 to 2023 basis period to 5 April 2024, or your accounting date if it is on or between 31 March and 4 April 2024
- any adjustments you need to make to your net profit or loss to reach your taxable profit or loss for each accounting period
- any other adjustments you need to make to your taxable profit for the year
Using this calculator
You cannot use this calculator if:
- your business is a partnership
- you have 3 or more accounting periods that fall partly or wholly within the period from the end of your 2022 to 2023 basis period to 5 April 2024, or your accounting date if it is on or between 31 March and 4 April 2024
This calculator makes the following assumptions:
- you are apportioning profits from accounting periods to your basis period by reference to days
- you will set any losses brought forward against your standard profit before your transition profit
- if claimed, you will set your trading income allowance against your standard profit before your transition profit
Last updated 8 April 2024 + show all updates
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A link to the calculator to help you work out your transition profit has been added.
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First published.