Impact assessment

Screening equality impact assessment for Basis Period Reform

Published 11 March 2024

Project objectives

The Basis Period Reform (BPR) measure simplifies how trading income is allocated to tax years for the self-employed and other unincorporated businesses like partnerships.

The reform removes the basis period rules and changes the system to a ‘tax year basis’, meaning a business’ profit or loss for the tax year is that arising in the tax year itself and overlap relief is no longer created.

A transition year to the new basis will take place in the tax year 2023 to 2024, which could accelerate profits for businesses and will make all outstanding overlap relief available. The tax year basis will then take effect from the start of 2024 to 2025.

If the customer’s basis period is not currently aligned to the tax year, it will be extended to 5 April 2024 in the transition year. This means customers must declare their profits for both the standard 12-month part of their basis period, and those in between the end of that part of the basis period and 5 April 2024. Customers do not have to change the date that they draw their accounts up to each year.

Additional profit taxed as a result of this change will be known as ‘transition profit’, and the customer will either pay tax on 20% of this each year over 5 years, or they can elect to accelerate any amount of the transition profit to be taxed sooner. For partners with multiple income sources not arising from trade, the full liability on such additional profits must be paid in the transition year.

The customer must also deduct any overlap relief they are due. Their overlap relief could take the form of overlap relief due as a result of aligning their basis period in the 2023 to 2024 tax year, or it could be overlap relief hitherto unclaimed from when they historically aligned to the tax year.

The stated Exchequer benefits are £1.715 billion as tax payments will be made earlier. However, this impact reverses over the long run to a broadly neutral position. Customers will also benefit through an annual £1.1 million reduction in admin burdens through simplification of the self-assessment process and it facilitates customer ingestion into Making Tax Digital (MTD).

This measure is expected to have an impact on approximately 528,000 Self Assessment customers who have a basis period which differs to the tax year. Businesses will not need to change their accounting date but for convenience some may choose to do so. There will be a transition year in 2023 to 2024 which will allow customers to make any changes for the new tax year basis.

Customers should deduct overlap relief during this transition year which will reduce their liability. Affected customers may have some additional tax to pay for the extra months of the transition period between the end of their ‘standard’ basis period and the tax year. To reduce the impact of this customers will spread their transition profit over 5 years unless they elect to take up an option to accelerate this spreading.

Customer groups affected

The customer groups affected are:

• sole traders
• partnerships
• trusts and estates
• non-resident companies
• agents

What customers will need to do

What customers need to do as a result of the change

Self Employed customers who have a basis period which doesn’t align with the tax year will be required to change their basis period to align with the tax year. This will be by completing additional boxes on their Self Assessment.

This is the final chance for customers to use their overlap relief if they experienced any overlap profits while running their business.

Customers will need to declare transition profit figures from the end of their standard basis period up to the end of the transition period (5 April 2024), spread across 5 tax years starting with the transition year in 2023 to 2024. 

How customers will access this service

Customers will access the changes through the Self Assessment system.

HMRC has published a G-form where customers can request their overlap relief figure if the details are held on their customer records. The G-form sits within a gov.uk guidance page titled ‘Getting your overlap relief figure’. Customers are able to call an HMRC helpline to retrieve their overlap relief figure, if the details are held in the customer’s records. Customers can also work out their overlap relief figure using their previous tax returns.

When customers need to do this

Actions need to be complete in the 2023 to 2024 tax return.

Assessing the impact

We assessed the impact on those in protected characteristic groups in line with the Equality Act and Public Sector Equality Duty and section 75 of the Northern Ireland Act:

• racial groups
• disabled
• sex
• gender reassignment
• sexual orientation
• age
• religion or belief
• pregnancy and maternity
• marriage and civil partnership
• people with dependants and those without (carers)
• political opinion (in Northern Ireland only)
• people who use different languages (including Welsh language and British Sign Language)

There is no evidence to suggest any specific impacts on those customers within any of the protected characteristic groups (listed above). Extra support will be provided as required.

Racial groups

Impact on customers

Welsh language within this protected characteristic group.  

Proposed mitigation

Working with Welsh Language Unit (WLU) to provide Welsh language products.

Disabled

Impact on customers

Customers with a learning disability may find this transition difficult to understand and undertake the necessary actions.  

Proposed mitigation

HMRC has published a Gov UK News Story, informing customers of the change and how they will be affected.  

HMRC has published 2 guidance pages on gov.uk with a further page due to be published in February 24.  

HMRC is creating interactive customer guidance; this is to help unrepresented customers to understand how the reform applies to their unique tax situation and guide them through completing their Tax Return.

HMRC is producing an information mailshot which will be issued to unrepresented customers only. This will guide them to all the information they will need to complete their tax obligations.

The above has been tailored to ensure understanding of both represented and unrepresented customers. 

HMRC hosts external stakeholder forums with representatives of accounting bodies, LITRG, etc. HMRC also hosts external webinars for the agent community.  

As per Self Assessment and GOV.UK business as usual (BAU), this guidance will abide by HMRC accessibility standards, including large print, Braille, paper file and Welsh Language editions.  

YouTube video will be accessible to some groups who may be unable to read print.

Sex

Impact on customers

There are minor impacts, this project affects the self-employed population who are disproportionately male and therefore men are affected more than women.

Proposed mitigation

No specific mitigation is planned.

Gender reassignment

Impact on customers

There is no evidence to suggest specific impacts on those customers within this protected characteristic group.   

Sexual orientation

Impact on customers

There is no evidence to suggest specific impacts on those customers within this protected characteristic group.   

Age

Impact on customers

There is no evidence to suggest specific impacts on those customers within this protected characteristic group however as with all changes some customers with age related illnesses may find this change difficult to navigate.    

Proposed mitigation

HMRC offers Extra Support Team services which can be accessed by those customers who cannot, for whatever reason, interact with HMRC digitally or who need additional support and reassurance.

Self Assessment Voluntary and Community Sector (VCS) engagement, customers can seek support from the VCS completing their Self Assessment returns.

As per Self Assessment business as usual (BAU), the customer can contact PT Ops (Personal Tax) Operations for support. PT Ops have technicians trained in BPR and overlap relief who can assist the customer. 

Religion or belief

Impact on customers

There is no evidence to suggest specific impacts on those customers within this protected characteristic group.   

People with dependants (carers)

Impact on customers

There is no evidence to suggest specific impacts on those customers within this protected characteristic group.   

Pregnancy and maternity

Impact on customers

There is a potential impact on those customers on maternity.

Proposed mitigation

A consultation was held and feedback from the consultation was that people going on maternity leave during the transition year in 2023 to 2024 might not make their ‘normal’ amounts of profit during that year so might not have been able to make full use of their overlap relief.  

As the tax information and impact note (TIIN) sets out, we introduced more flexibility in the use of overlap relief (extended loss carry back) to give these people more opportunity to use their overlap relief losses. 

Marriage and civil partnership

Impact on customers

There is no evidence to suggest specific impacts on those customers within this protected characteristic group.   

Political opinion (for Northern Ireland only)

Impact on customers

There is no evidence to suggest specific impacts on those customers within this protected characteristic group.   

People who use different languages (Including Welsh Language and British Sign Language)

Impact on customers

HMRC is obliged to provide Welsh language versions of documents, publications, and services. 

Proposed mitigation

The customer can request Self Assessment forms and their corresponding guidance notes/help-sheets in Welsh. GOV.UK supports publishing Welsh versions of any official publication, allowing government organisations to comply with their Welsh language schemes. Customers can also request a Welsh language PT Ops query handler. 

The service will be available in both English and Welsh. 

Opportunities to promote equalities

We have considered opportunities to promote equalities and good relations between people in each of the protected characteristic groups and those outside of that group.

A full Equality Impact Assessment is not recommended.