What is a Period of Account?

A Period of Account is simply the specific timeframe for which a business chooses to draw up its commercial books and accounts.

For example, if you run a business and finalise your financial records from 1st January to 31st December every year, that 12-month stretch is your period of account. As a business owner, you are generally free to choose whatever accounting date makes the most commercial sense for your operations.

You can view or update your periods of account in the MTD Business Details section, accessible from your Self Asessment Workflow. This may be necessary before you can submit your Final Declaration for the tax year.

What is a Basis Period?

Prior to the 2023/24 tax year, a basis period dictated the specific timeframe of profits you were taxed on during a given UK tax year.

• The Standard Tax Year: HMRC’s standard tax year always runs for 12 months, from 6 April to the following 5 April (for example, the 2022/23 tax year ran from 6 April 2022 to 5 April 2023).
• The Old Alignment: Under the old system, a continuing business was usually taxed based on the 12-month commercial accounting period that concluded within that specific tax year.

Basis Period Reform

Beginning with the 2023/24 tax year, HMRC overhauled these rules through a process known as basis period reform.

• Who is impacted? This shift specifically altered the rules for businesses whose accounting year-end does not naturally align with the end of the standard tax year (meaning their commercial accounts close on a date other than between 31 March and 5 April).

From 6th April 2024 Onwards

Starting with the 2024/25 tax year, you are required to report and pay tax strictly on the profits generated during the standard tax year (6th April to the following 5th April), regardless of when your business closes its books.

How This Impacts Your Tax Calculations:

• If your accounting year ends between 31st March and 5th April: Your reporting process remains unchanged.
• If your accounting year ends outside of those dates: Your tax will be calculated by combining figures from two different accounting periods.

Under MTD Income Tax and Self Assessment HMRC allow you to view and update your periods of account. You may be required to do this before submitting your final declaration.