Confused about first year sole trader taxation

[plusminus]

Happy New Year everyone!

I am currently preparing my self-assessment tax return for 2010/2011. I was a full-time student until July 2010 and then started as freelancer and registered as self-employed from 1/8/2010.

I don't quite understand for what period I need to calculate income for taxation now, as the tax year started on 6 April 2010 and I already had some income from p/t work, let's say 2k, between the start of the tax year and the beginning of my self-employment.

If I start calculating from 1/8/2010, where would the income appear (if at all) that I had from April to that date as a f/t student?

Also, should I calculate from 1/8/2010 to 31/07/2011, or 1/8/2010 to 5/4/2011? I found some advice online that the accounting period does not need to match the tax year:

http://www.accountingweb.co.uk/anyanswers/annual-investment-allowance-and-first-year-trading-sole-trader
http://www.taxattack.co.uk/basisperiods.php

The period is quite important, because I had good income until March 2011, but then little to no income until September, so it would make sense for me to calculate a full year until July 2011 for a more even profit calculation.

[mullet]

In your first year's tax return you would complete both employment and self employment pages, i.e. the sources of income are kept separate.

For your self employment, you need to think about tax years, accounting periods and basis periods. Tax years are simple, 6 April to 5 April. Accounting periods are usually 12 months long. Basis periods are the way in which income (or rather profit or loss) is allocated to a particular tax year.

For the first period of trading the basis period for the first tax return is always the date of commencement to the following 5th April. Basis periods for the second and third years depend on the date which you choose to complete your accounts to (accounts date), and you can end up being taxed on the same profits twice (overlap profit).

Have you chosen an accounting date? If so, what is it? The easiest date to choose is 5 April, then your accounting period will always match your basis period and there will be no overlap profit. But this is by no means compulsory, and it might not be best in your particular circumstances.

[plusminus]

Thank you for clarifying mullet, it's a big help.

So if I would calculate from 6th April 2010 to 5th April 2011, then the basis period would be 1/8/2010 to 5/4/2011. And the accounting period from 6/4/2010 to 5/4/2011? In the return there is an option to select

My 'basis period' (the self-employed period for which I am taxable) is not the same as my accounting period

and it seems to me that applies in my case - or am I wrong?

[mullet]

No, the accounting period would be 01-08-2010 to 05-04-2011, to match commencement of trade. But in practice it wouldn't make a difference.

My 'basis period' (the self-employed period for which I am taxable) is not the same as my accounting period

No, it would be the same. If you tick the box, then I guess that the system would expect there to be an apportionment (i.e. of a longer period of account into a shorter basis period).

[plusminus]

Thank you, that's most useful!