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HMRC internal manual

Business Income Manual

Averaging: which years may be averaged

S222 Income Tax (Trading and Other Income) Act 2005

An averaging claim can cover any two consecutive tax years during which the claimant was carrying on a qualifying trade, profession or vocation, except:

  • a tax year which precedes a year which has already been included in an averaging claim,
  • the tax year in which the trade etc. commenced,
  • the tax year in which the trade etc. ceased,
  • where the profits are derived wholly or mainly from creative works, a tax year in which the trade etc. became qualifying or ceased to qualify.

So, for example:

  • a claim may not be made to average year 3 with year 4 if year 4 has already been averaged with year 5;
  • a partner cannot make a claim for the year she joins a partnership;
  • an author who has been resident abroad cannot claim for the year he returns to the UK;
  • where a profession evolves into a qualifying profession, a claim may not be made for the first year it qualifies.