Businesses that do not draw up their accounts to 31 March or 5 April will experience ongoing additional administrative burdens following the new tax year basis introduced in April 2024.

One way to avoid this is to change year end for 2023/24. But there are some things to think about before making the move. While the end of January 2025 was the due date for your 2023/24 tax return, it can be amended up to a year afterwards.

From April 2024, business profits of a tax year are the profits actually arising in the tax year regardless of the period for which you draw up your accounts. If your accounts run to a date other than 5 April, or 31 March (which is treated as equivalent to 5 April), you have to calculate the profit each tax year by apportioning the two accounting periods covering that tax year.

Calendar year accounting

For example, if your accounting date is 31 December, then your 2024/25 taxable profits will consist of profits for the period 6 April 2024 to 31 December 2024 plus those from 1 January 2025 to 5 April 2025, based on your 2024 and 2025 accounts.

The difficulty with this will be apparent. The 2024/25 tax return must be submitted by 31 January 2026, just a month after the end of the year to 31 December 2025. You can complete the return using estimated profits for the later accounting period and amend it later, but it would be simpler to match your accounting period to the tax year.

Accounting for standard and transition profits

The year 2023/24 is a transitional year from the old system of taxing the profits of the accounting period ending in the tax year. The 2023/24 taxable profits will consist of a ‘standard part’ – the 12 months following the end of the basis period for 2022/23 – plus a ‘transition part’ running from the end of the standard part to 5 April 2024 (or 31 March 2024 if you prepare accounts to that date).

Unless your accounting date was already 5 April or 31 March, you will be taxed in 2023/24 on more than 12 months’ profits. However you can deduct any brought forward overlap relief from your transition profits, and then spread any remaining transition profits over a period of up to five years. Any overlap relief from when the business started or changed accounting date which is not used now will be lost.

The transitional year is clearly a good time to change your accounting date to 31 March and you can amend your 2023/24 to achieve this. You could prepare one long set of accounts from the end of your accounting date in 2022/23 right up to 31 March 2024 or a 12-month period to your old accounting date followed by a short period to 31 March 2024.

Which you choose may affect use of any overlap relief and how much profit you can spread over five years. With one long accounting period, the transition profits are calculated by apportioning the profits of the long period. If the actual profits of the transition period are higher, by preparing separate accounts more profits could be spread over future years, delaying the tax. But you should also take into account the rates at which your profits are likely to be taxed.