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, 2022/23:

With a 31 March year end the basis period will be the year ending 31 March 2023.
With a 30 April year end the basis period will be the year ending 30 April 2022.

(2). 31 May year end

1. Profit for each trading period

	£
Nine months ending 31 May 2022 (£4,000 x 2) + (£3,000 x 5) + (£6,000 x 2)	35,000
Year ending 31 May 2023 (£6,000 x 4) + (£10,000 x 8)	104,000

2. Taxable profit for the first two tax years

	£
2021/22 (1 September 2021 to 5 April 2022) 7/9 x £35,000	27,222
2022/23 (1 September 2021 to 31 August 2022) £35,000 + (3/12 x £104,000)	61,000

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