Details from business records are required to calculate the overlap relief figure. Credit: chaylek/Shutterstock.

The UK’s tax authority, HMRC, has introduced an online calculator designed to assist sole traders and partners in determining their overlap relief figure for the 2023/24 income tax self-assessment (ITSA) return.  

This development comes as the tax system transitions from basis periods to taxing business profits on a tax year basis starting in the 2024/25 tax year. 

The 2023/24 tax year serves as a transition period, during which business profits and losses will be aligned with the tax year.  

Overlap relief, which is said to be relevant for profits brought forward from earlier periods, is required be used during this year.  

The net profit or loss for the transitional period, after considering overlap relief, will be spread over the next five tax years unless an alternative election is made by the taxpayer. 

To calculate the overlap relief figure, individuals or their agents can now use the newly launched HMRC tool.  

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The tool requires details from business records, such as the start date of the business or the date of joining a partnership.  

In the absence of complete information, HMRC advises using ‘reasonable estimates’.  

The HMRC has requested that taxpayers and agents aiming to use this service do so by 31 December 2024, to enable the authority to manage demand effectively.  

In instances where HMRC does not have the overlap relief figure, it will provide guidance to help calculate it, including the option to use the new online calculator. 

In addition, reports in November 2024 indicated a decrease in the HMRC investigations into serious tax fraud and avoidance, with cases known as Code of Practice 8 and 9 dropping to a six-year low.  

The number of HMRC tax fraud investigations has fallen from 1,091 in the 2022/23 period to 480 in 2023/24.