Accounting Periods And Basis Periods For Self Employed Business

Best regardsto the tax calculationresulting from the net profit
Terry Cartwrightbeing declared.
Accounting Periods And Basis Periods For SelfAfter choosing the April to April financial tax
Employed Businessyearaccounts are required to be submitted by the
Self employed business in the UK is required tosubmissiondeadline of 31 January the following
produce aset of financial accounts for a 12 monthyear. Earliersubmission is recommended as by
trading period.submitting the finalaccounts and tax returns online
The format of the accounts is the personalby 31 October each year theinland revenue will
decision of theproprietor and can be a full set ofcalculate the income tax and nationalinsurance
annual accountsincluding profit and loss accountpayable.
and balance sheetincluding using control accountsWhen a self employed business has been in
and cash and bank recordsand the selfbusiness for twoor three years and has chosen a
assessment tax return.different 12 monthaccounting period to the
An appropriate accounting system for many selffinancial tax year the 12 monthtax is calculated
employedbusiness would not be to prepare a fullaccording to a basis period. Up untilthat point the
set of annualaccounts but instead to prepare aaccounts may be subject to apportionment
simple income andexpenditure account. Preparingtocalculate the tax due.
an income and expenditureaccount allows a muchThe basis period under which the business tax is
simpler accounting or bookkeepingsystem wherecalculatedis the 12 month accounting period ending
simple accounting software can be used.in the specifictax year. A business which has a 12
The objective of any bookkeeping software beingmonth trading periodending 31 December 2007
to maintainaccurate financial records and producewould be taxed under the basisperiod 2007 to
the accountingrecords and totals required to2008 being the basis period 6 April 2007 to
complete the inland revenueself assessment tax5 April 2008. The same rules apply if the
return each year. Financial control isvery importantaccountingperiods are shorter or longer than the
and the bookkeeping software should alsoproducestandard 12 monthperiod.
regular financial statements showing the profitIf the accounting date is changed by a sole trader
andloss of the business throughout the accountingtheinland revenue are informed of the change on
tradingperiods.the selfassessment tax return and the re3asons
The financial tax year varies depending uponfor the change. Ifas a result the self assessment
which countrybusiness is conducted. In the UStax return arrives late thetax will be assessed on
accounts are preparedduring an accounting periodthe previous basis period.
from 1 January to 31 Decembereach year. In theChanging an accounting date that overlaps two
UK the standard financial year adopted bythebasis yearsresults in the business being taxed
inland revenue is from 6 April each year to the 5twice for the sameaccounting profit as the
Aprilthe following year.business would be taxed under bothbasis years.
In the UK tax rules are set for each financial yearThe extra tax paid can be highly unwelcome
and byadopting the standard tax year a smallbutcan be reclaimed at a later date through the
business can benefitby preparing the financialselfassessment tax return.
accounts under a single set oftax rules andThe penalty for late submission of the self
preparing the self assessment taxassessment taxreturn in the UK is 100 pounds
returnaccordingly. Adopting a different financialand interest is also chargedon any outstanding
period involvesstraddling the official tax year andincome tax and national insurance fromthe first
more than one set oftax rules might be applicableday after submission was due.