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, 2021/22:

With a 31 March year end the basis period will be the year ending 31 March 2022.
With a 30 April year end the basis period will be the year ending 30 April 2021.

(2). 31 May year end

1. Profit for each trading period

	£
Nine months ending 31 May 2021 (£4,000 x 2) + (£3,000 x 5) + (£6,000 x 2)	35,000
Year ending 31 May 2022 (£6,000 x 4) + (£10,000 x 8)	104,000

2. Taxable profit for the first two tax years

	£
2020/21 (1 September 2020 to 5 April 2021) 7/9 x £35,000	27,222
2021/22 (1 September 2020 to 31 August 2021) £35,000 + (3/12 x £104,000)	61,000

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