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When commencing self-employment, choosing an accounting date (the choice of year-end) can be crucial in determining whether low profits are taxed twice or high profits are taxed twice.

It will also determine the level of overlap relief carried forward and utilised on a future change of date or on cessation.

When determining an accounting date, it may be considered easiest if accounts are made up to 31 March or 5 April in the first tax year so as to eliminate any chance of an overlap profit and to maximise the period between the year-end date and the filing deadline for the Tax Return for the year.

Example:
William starts self-employment on 1 May 2014.

He decides on a first accounting date of 30 April 2015 and annually on 30 April thereafter, as his first year is likely to create a small profit whereas he anticipates higher profits thereafter.

He will be taxed on the profits for the period 1 May 2014 to 5 April 2015 twice, as they form the basis of the 2014/15 assessment (1 May 2014 to 5 April 2015) and also part of the 2015/16 assessment (year to 30 April 2015). If his profits are very low and later rise, then this could be of a considerable tax benefit to him as he will pay lower taxes than if he chose a 31 March year-end.

However, it should also be noted that his overlap relief going forward will also be correspondingly low and this could cause a problem on cessation.