Basis Period Reform for Barristers and Partners

From the 2024 to 2025 tax year, self-employed people, including barristers and partners in firms, are taxed on the profits of the tax year itself rather than on the profits of an accounting period ending in the tax year. The old approach let a barrister with a 30 April year end be taxed a long way behind real time. That is gone.

The transition year was 2023 to 2024, when the change was made. Anyone whose accounting date was not already 31 March or 5 April had to bring extra months of profit into charge to catch up to the tax year.

Because a 30 April year end sat almost a full year behind the tax year, moving onto the tax-year basis meant recognising up to around eleven extra months of profit in one go. That one-off figure is the transition profit, sometimes called the catch-up charge, and for a busy set of chambers or a profitable partner it can be substantial.

Any overlap relief built up in the early years of practice is set against it, which helps, but for most established barristers and partners the overlap relief is far smaller than the transition profit it is offsetting.

The relief in the design of the reform is that the transition profit can be spread over up to five years, to 2027 to 2028, rather than taxed all at once. That turns a single painful bill into five smaller ones, which is much easier on cash flow.

There is planning in exactly how the spread interacts with your other income and your marginal rate each year, and with whether you have moved onto the cash basis. It is worth having that looked at rather than accepting the default, and it is part of what a barrister return should handle.