HMRC Overlap Relief For Unincorporated Businesses

There will be a major change for unincorporated businesses that prepare their accounts to a date other than 5 April or 31 March. From 6 April 2024, such businesses will need to compute their taxable profits from 6 April to 5 April each year, regardless of their accounting end date.

So, for a sole trader or partnership making up accounts to 31 December each year, their 2024/25 profits would be calculated as 9/12ths of their profits for the year ended 31 December 2024 plus 3/12ths of their profits for the year ended 31 December 2025.

This will invariably require the inclusion of an estimate of the profits of the later period, with subsequent amendment once the final figures are known. For this reason, many businesses may wish to consider changing their accounting date, and we can of course advise you of the tax consequences.

More imminent is the change in the way that profits are to be taxed for the 2023/24 tax year. The current tax year is a “transitional year” with complicated rules for calculating business profits. For many businesses, the change will result in a higher tax bill on 31 January 2025, and we would like to work with you now to calculate the impact this will have on your cash flow and ways in which this could be mitigated.

As mentioned before, those already preparing accounts to 31 March or 5 April are not affected.  So, if you prepare accounts up to any other date, please contact us now to discuss how you are affected.

If you would like more information or would like to discuss your tax affairs in more detail, please don't hesitate to contact your usual relationship manager here at JS or email enquiries@jsllp.co.uk.