In: Accounting
Question 2
Marie started trading as a hairdresseron 1 January 2016. He makes up accounts to 30 Julyeach year. The profits were calculated as:
Period to 31 July 2016 £18,000
Year to 31 July 2017 £40,000
Year to 31 July 2018 £47,500
Year to 31 July 2019 £48,000
A Tax Year is the year counted from January 1 to December 31, and a person is filled income tax returns by April 15. there may be different deadlines for filling tax returns.
- Trading is start in the tax year is 2015/2016 that is July 1, 2015 to January 1, 2016
- Taxable profit will be 18,000 and the tax year is counted as 2016/2017 and the base period is from July 1, 2016 to 30, June 2017
-Taxable profit will be 40,000 and the tax year is counted as 2017/2108 and the base period is from July 1, 2017 to 30, June 2018
-Taxable profit will be 47,500 and the tax year is counted as 2018/2019 and the base period is from July 1, 2018 to 30, June 2019
Overlap profit is that profit in which person working as self employed and selected an accounting period that is not matched with the HMRC bases.
Normally, the tax year is the year which is 6 April to 5 April each year
Relief
-HMRC must be notified of changes in the tax return
-First account month must be more than 18 months
-Changes cannot be made to take tax advantages but only for the valid reason