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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: income from self-employment

Bilal started trading on 1 July 2024 and made up his first accounts for the 9 months to 31 March 2025, then 12 months to 31 March 2026. Profits were £27,000 for the 9 months to 31 March 2025 and £48,000 for the year to 31 March 2026. Using current year basis rules with time apportionment by months, what is Bilal's taxable trading profit for 2025/26, the second tax year?

Taxable profit for 2025/26 is £48,000. Where an accounting period of 12 months ends in the second tax year, that period is the basis period. The year to 31 March 2026 is exactly 12 months, so its full profit is assessed.

  1. A£48,000Correct
  2. B£27,000
  3. C£36,000
  4. D£75,000

Explanation

The second tax year is 2025/26. The accounting period ending in 2025/26 is the year to 31 March 2026, which is a full 12 months, so the basis period is the 12 months to 31 March 2026. Taxable profit is therefore £48,000. Using only the 9-month profit would ignore the rule that a 12-month period ending in the year is used. Adding both periods would double count profits.

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