HMRC has introduced an online calculator to assist self-employed individuals and partnerships in determining their overlap relief figures for the 2023/2024 tax year. This tool is designed to aid taxpayers in accurately reporting their taxable profits during the transition to the new tax year basis.

Overlap relief addresses the issue of profits being taxed twice during periods that fall into two tax years, known as overlap periods. This typically occurs when a business’s accounting period does not align with the tax year. The relief allows for the deduction of these overlap profits in specific circumstances, such as when changing accounting dates or on cessation of the business.

To utilise the calculator, users will need details including the start date of their business or partnership, accounting periods for the first three years and any changes to accounting dates. The tool is accessible through the HMRC website and requires a Government Gateway user ID and password.

HMRC advises that if taxpayers cannot determine their overlap relief figures from previous tax returns or business records, they may request assistance. HMRC can provide the necessary figures if they were included in prior returns, otherwise, they may supply historical profit figures to facilitate the calculation.

This initiative is part of HMRC’s broader effort to support taxpayers during the basis period reform, which aims to simplify the taxation process by aligning accounting periods with the tax year. Taxpayers are encouraged to utilise the new calculator to ensure compliance and accuracy in their tax filings. 

An HMRC spokesperson said: 

This tool is designed to assist taxpayers in accurately calculating their overlap relief, facilitating a smoother transition to the new tax year basis.”

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