By Clare Kendall, Business Owner & Bookkeeper, CLK Books
Originally posted: 23rd June 2023 | Latest Update: 11th September 2023
Overlap refers to profits which have been taxed twice, usually because of a change in your accounting year, or a starting up with a non-standard year end. If you are a sole trader and make up your business accounts to a date which isn’t 31st March or 5th April, it’s likely you may have overlap relief to claim.
Overlap relief, allows you to knock these profits off your current year’s tax profits, meaning you have only paid tax once on them. Usually you can do this if you change your accounting dates or close your business. However, HMRC have announced that tax year 2023-24 will be the last year you can use overlap relief. This is because 2023-24 is the transition year for Basis Period Reform.
If your business tax year has always been different to the standard tax year or you changed to a different date at some point, you could have overlap profits.
The easiest place to find them is on your last self assessment. Look at the Self-employment (full) pages in Box 70 "Overlap profit carried forward".
If you don’t have an overlap profit shown, it could be worth you looking back through previous returns to make sure it hasn’t been ‘lost’. Used overlap profit would show in box 69 "Overlap relief used this year". If it simply disappears from one year to the next (or your tax return switches from the (full) to (short) self-employment pages) you should still have it available to use. You may need to contact HMRC, or talk to your tax agent to confirm this.
This summer, HMRC is planning to launch an online form for submitting requests for details about overlap relief. They intend to provide an easier way to submit requests and make sure that these are dealt with separately from general post*. (*See below for update)
If you don't have a tax agent and need help to understand how this will affect you, get in touch.
This video will help you understand more about Basis Period Reform:
or to read it click on this link: Basis Period Reform
On 11th September 2023, HMRC have released their online service enabling you to get your overlap relief figure. Access the service here: Get Your Overlap Relief Figure.
HMRC's policy paper on Basis Period Reform