Current year

The basic rule is that an individual’s taxable profit assessed in each tax year will be
based on the profits for the 12 months accounting period ending in that tax year. This
is known as the current year basis. This applies to individuals who have
been in trade for several years past.

An individual in business has the flexibility to choose when its accounting period will
end, as the business’ year end doesn’t have to be 5th April each year. Whatever year
end is selected, care has to be taken to ensure that the profits are taxed in the correct
tax year.

Profits have to be taxed in the tax year which the 12 months accounting period ends
in.

The accounting profits have to be adjusted for tax purposes, including capital
allowances and these adjusted taxable profits will then be subjected to income tax.