Test your understanding: answers
(1). Where a trader’s monthly profits are falling it may be beneficial to choose a 31 March year end. With a 31 March year end:
- Profits are taxed in the year they are earned and there are no overlap profits.
- Instead of earlier, higher profits being taxed twice, later, lower profits will be taxed.
For example, in Nora’s second tax year, 2015/16:
- With a 31 March year end the basis period will be the year ending 31 March 2016.
- With a 30 April year end the basis period will be the year ending 30 April 2015.
(2). 31 May year end
1. Profit for each trading period