Taxation of the unincorporated business for ATX (UK)

(1). Where a trader’s monthly profits are falling it may be beneficial to choose a 31 March year end. With a 31 March year end:

Profits are taxed in the year they are earned and there are no overlap profits.
Instead of earlier, higher profits being taxed twice, later, lower profits will be taxed.

For example, in Nora’s second tax year, 2020/21:

With a 31 March year end the basis period will be the year ending 31 March 2021.
With a 30 April year end the basis period will be the year ending 30 April 2020.

(2). 31 May year end

1. Profit for each trading period

	£
Nine months ending 31 May 2020 (£4,000 x 2) + (£3,000 x 5) + (£6,000 x 2)	35,000
Year ending 31 May 2021 (£6,000 x 4) + (£10,000 x 8)	104,000

2. Taxable profit for the first two tax years

	£
2019/20 (1 September 2019 to 5 April 2020) 7/9 x £35,000	27,222
2020/21 (1 September 2019 to 31 August 2020) £35,000 + (3/12 x £104,000)	61,000

Taxation of the unincorporated business for ATX (UK) - part 3: self-test answers