Taxation of the unincorporated business for ATX-UK - part 3: self-test answers

Test your understanding: answers

(1). Where a business’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, 2023/24:

  • With a 31 March year end the basis period will be the year ending 31 March 2024.
  • With a 30 April year end the basis period will be the year ending 30 April 2023.

(2). 31 May year end

1. Profit for each trading period

 £
Nine months ending 31 May 2023
(£4,000 x 2) + (£3,000 x 5) + (£6,000 x 2)
35,000
Year ending 31 May 2024
(£6,000 x 4) + (£10,000 x 8)
104,000


2. Taxable profit for the first two tax years

 £
2022/23 (1 September 2022 to 5 April 2023)
7/9 x £35,000
27,222
2023/24 (1 September 2022 to 31 August 2023)
£35,000 + (3/12 x £104,000)
61,000

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