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The allocation of accounting profits to basis periods for tax purposes was reformed by FA 2022, s 7, Sch 1 and replaced with a tax year basis from the tax year 2024/25. The rules which apply for the tax year 2024/25 onwards are set out in the Tax year basis from 2024/25 onwards guidance note and the rules for the transitional tax year of 2023/24 including businesses starting in 2023/24 are set out in the Basis period transitional rules 2023/24 guidance note. The details below therefore only apply for tax years up to and including 2022/23.

Special rules apply to calculate a trader’s taxable profits when there is a change of accounting date. These special rules apply for unincorporated businesses only. The rules apply equally for businesses using the simplified cash basis. See the Cash basis - overview guidance note.

A trader will change their accounting date when they draw up accounts for a period which is not 12 months long.