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What is Basis period reform?
Last verified 31 October 2026
Basis period reform is the change to the rules that decide which of a business's profits are taxed in which tax year. Under it, a business's profit or loss for a tax year is the profit or loss arising in the tax year itself, regardless of its accounting date.
Why it matters to landlords
HMRC's note on the change says the old basis period rules depended on a business's accounting date and could produce overlapping periods, taxing the same profits twice and creating overlap relief. The reform removes those rules and stops further overlap relief from being created. It affects the self-employed and partners, and applies to trading income.
It matters for MTD because quarterly updates and the return follow the tax year, 6 April to 5 April. HMRC's adjustments guidance says that if your accounting period does not align with the tax year you must adjust your totals, or confirm that none are needed. Landlords with only rental income should check whether they also have trading income, such as a side business, before assuming this does not apply.
Example
Omar has a self-employed business with a 30 September year-end and also lets a flat. Under the reformed rules his business profit is allocated to the tax year in which it arises, and his MTD software must be set up for his accounting period before the first quarterly update.
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