Welcome to first in a series of blog posts about basis periods, found in the AAT Level 4 Business Tax module.

1 – Introduction

The basis period is the accounting period within which an individual’s income or profits
will be subjected to tax.

Every individual tax payer pays their taxes based on a tax year. The official
government tax year is from 6 April to 5 April the following year. The current year
which we have been working with and will continue to work with in this text has been
based on the 2021/22 tax year, which is from 6 April 2021 to 5 April 2022.

An individual in business will need to be subjected to income tax in each year of
operation and this is usually based on their profits of the 12 months accounting period
ending in each tax year. This will be applicable to an individual who has been trading
for several years past.

In order to ensure that all taxable income is subjected to tax and that there is an
assessment for each tax year of trade the business operates in, the basis periods for
the following have to be considered:

– Current year (covered in part 2)
– Year of Commencement (covered in part 3)
– Year of Cessation (covered in part 4)