The basis period is the calendrical period of 12 months upon which a sole trader calculates their tax each year. You calculate both your income and expenditures during this 12 month period and if you are self-employed, you can choose your own basis period.
You can choose your own basis period from any of the following:
It is important to note, however, that using a custom period can complicate your accounting and runs the risk of you being overtaxed and having to later make a claim. As not every basis period will overlap 100% with the standard tax year, it’s best to only use a custom basis period if absolutely necessary. If you do need to later claim any duplicated tax, you can claim Overlap Relief via HMRC. This isn’t overly complicated, but it can add an additional layer of hassle and complexity that isn’t necessary. We recommend starting your business and running your accounts in line with the standard tax year of 6th April to 5th April.
When you first start your business, there’s a lot to navigate with your accounts, so let our team help you get set up! Our experts are well versed in Balancing Payments and accounting, so contact us today.
Of course! We advise that you start a comprehensive spreadsheet to keep track of your taxable income and relevant expenses throughout the year in order to make your tax return more straightforward. This can be done on an Excel spreadsheet or Google sheet to keep things simple! Contact our team for more advice today!