Some businesses still include part of their 2023/24 transition profits in 2025/26. Recover the original calculation and earlier allocations. Elections, prior amounts taxed and cessation can change what remains; do not apply a percentage to this year’s bank receipts.
Why earlier profits can still matter
The 2023/24 transition rules moved affected businesses towards reporting profits on a tax-year basis. Where additional transition profits arose after relevant overlap relief, spreading could apply over five years ending in 2027/28.
A business with a non-tax-year accounting date is more likely to need this checked. Not every sole trader has transition profits, and changing accountant does not create a new spreading period.
Recover the earlier calculation
Provide the 2023/24 computation, overlap relief used, 2024/25 return and a schedule of transition profit already taxed. Any election to bring amounts into charge earlier needs to be reflected in the remaining balance.
For example, an accountant cannot reliably calculate the 2025/26 allocation from the latest bank statements alone. They need to know the original transition figure and what happened in the earlier returns.
Avoid applying the same percentage blindly
The default spreading approach does not mean the same amount is always included regardless of earlier elections or cessation. HMRC's 2025/26 helpsheet explains when spreading still applies and when amounts have already been fully taxed.
If the business has ceased, remaining transition profits can need different treatment. Tell the accountant about closures, incorporation or other significant changes before the return is finalised.
Keep the current profit calculation separate
Transition profit is not new cash earned in 2025/26. It can nevertheless affect the tax calculation alongside current profits and other income. That is one reason a bill may differ from a simple percentage of this year's bank surplus.
Ask TaxSimba to confirm whether reconstructing an incomplete transition calculation is included or requires additional work. A proper handover from the previous accountant can save time. Keep the final schedule with your tax records so the remaining amount can be checked consistently in later years.
A simple spreading schedule, before elections
Illustration: £25,000 transition profit gives £5,000 in each of 2023/24, 2024/25, 2025/26 and 2026/27 under the ordinary 20% approach, leaving £5,000 for 2027/28. This assumes no acceleration election or earlier cessation.
An election to tax more earlier changes the remaining schedule. Permanent cessation before the fifth year brings the remaining balance into the cessation year under HMRC’s rule. Reconcile the original amount, annual allocations and balance before adding anything to current trading profit.
Check the home nation used for your tax calculation
Tell the accountant whether you live in England, Scotland, Wales or Northern Ireland, and about any moves during the tax year. Scottish rates differ for wages, pensions and most other taxable income; savings and dividends use UK rules. Welsh rates are set separately. Use the rules for the relevant year and your actual taxpayer status.
See Scottish Income Tax and Welsh Income Tax. These differences do not make a London address or an England-only earnings example appropriate for everyone.
Reconcile the transition-profit balance annually
Illustrative preparation example.
Recover the original transition profit, amounts taxed in each year and any acceleration elections. Compare the remaining balance with the prior return before preparing the next allocation. A new accountant cannot reconstruct that history from current-year bank deposits alone.
Check: Does the schedule explain the original amount, amounts already taxed and balance remaining?
| Check | Practical action |
|---|---|
| What was the original transition-profit figure? | Recover the transition computation and overlap-relief evidence. |
| What has already been taxed or elected? | Reconcile subsequent returns and any accelerated-charge election. |
| Has the business ceased or changed? | Check whether the remaining spread needs different treatment. |
Does every sole trader have transition profit?
No. It depends on accounting dates and the transition calculation. Check the prior computation.
Can I start a new five-year spread with a new accountant?
No. The existing history follows the taxpayer. Provide the handover schedule and prior returns.
Download a checklist for this guide
- Locate the 2023/24 transition computation.
- Collect overlap-relief evidence.
- List transition amounts already taxed.
- Retain elections and subsequent returns.
- Explain cessation or major business changes.