Basis Period Reform Calculator, 2026/27

How this is calculated

Basis period reform aligned all unincorporated businesses onto the tax year (6 April to 5 April) from 2024/25 onwards. Businesses whose accounting year did not already match the tax year had a transition year in 2023/24, taxing profits from the end of their last normal accounting period through to 5 April 2024, a period often longer than 12 months.

Any profit relating to the extra months, less unused overlap relief carried forward from when the business started, became transition profit. Rather than taxing it all in one year, HMRC spreads it evenly across five tax years, 2023/24 to 2027/28, unless the taxpayer elects to bring more of it forward.

The calculator divides your net transition profit by five, adds one slice to your ongoing annual profit for the year in question, and compares the tax due on the combined figure against tax on ongoing profit alone to show the extra cost.

Why this still matters in 2026/27

2026/27 is the fourth year of the five-year spreading period for most affected businesses, meaning many sole traders and partners are still absorbing an extra slice of taxable profit on top of their normal trading results, which can be an unwelcome surprise if it is not planned for.

Because the transition slice stacks on top of ordinary profit, it can push some taxpayers into a higher tax band, into the personal allowance taper, or affect entitlement to Child Benefit, even though the underlying trading profit has not increased.

Practical points for the remaining years

Keep a clear record of the original transition profit calculation from your 2023/24 return, the overlap relief actually used, and how much has already been taxed, since this affects payments on account and budgeting for the remaining years.

If profits are expected to fall in a future year, it may be worth checking whether accelerating some of the remaining transition profit into a lower-income year reduces the overall tax cost, though this needs a specific election and careful comparison.

What is transition profit?

It is the extra profit taxed in 2023/24 for businesses whose accounting year did not end on or around 5 April, covering the gap between their normal accounting date and the end of the tax year, reduced by any unused overlap relief.

Do I still have transition profit to pay in 2026/27?

If your business had transition profit in 2023/24 and did not elect to accelerate it, one fifth of the net figure is added to your taxable profit each year from 2023/24 to 2027/28, so most businesses are still in year three or four of that spread.

Can I choose not to spread it over five years?

You could elect to bring forward more of the transition profit into an earlier year, for example to use up a low-income year or unused personal allowance, but you cannot spread it over more than five years.

Does this affect payments on account?

Yes. Transition profit increases your total tax liability for the year, which increases the payments on account HMRC calculates for the following year, so it is worth budgeting for both the extra tax and the knock-on effect on payments on account.