Basis Period Reform and Your GP Partnership: The Tax-Year Basis, the Transition and Overlap Relief

Basis period reform quietly changed how every GP partnership is taxed. Partnerships now pay tax on the profit arising in the tax year itself (6 April to 5 April), rather than on the profit of the accounting year ending in that tax year. For many practices the change is invisible most years, but the one-off transition that delivered it still affects current and near-future tax bills. This is the dedicated deep-dive for a GP practice: the move to the tax-year basis from 2024/25, the one-off 2023/24 transition year, how overlap relief was used up, the option to spread the transition profit over five years, and the apportionment a practice faces if its accounting date is not 31 March or 5 April.

The GP partnership tax complete guide covers basis period reform in a short section as one item among many; this page is the full explainer it only summarises. For how profit is divided between partners, see GP partnership profit sharing and tax planning, which links here for the basis detail. To see how the accounting date frames the accounts themselves, see reading GP partnership accounts; for reserving for the tax that the reform creates, see drawings versus profit and tax reserving. This page explains why the tax now moves the way it does.

What Basis Period Reform Is, in One Paragraph

From 2024/25 onwards, a partner is taxed on the profit arising in the tax year (6 April to 5 April), not on the profit of the accounting period ending in the tax year. That is the whole reform in a sentence. The partnership still files one partnership return (the SA800), and each partner's share still flows to the partnership pages (the SA104) of their own return, taxed as self-employed trading income. You are still taxed on your profit share, not your drawings. Only the measure of the year's profit changed, from the old accounting-year basis to the new tax-year basis.

The Old Current-Year Basis (Brief, for Context)

It helps to know what we moved away from. Under the old current-year basis, a practice with, say, a 30 June year-end was taxed in a tax year on the profit of the accounting year ending in that tax year. That created a lag between earning profit and being taxed on it, and it left some partners carrying overlap profit: profit that had been taxed twice when they first started, and that was only relieved on cessation or a change of accounting date. That overlap profit is the thread that runs into the transition, so keep it in mind; otherwise the old basis is now just background.

The lag was the feature partners noticed most. With a 30 June year-end, the profit of the year to 30 June 2023 fell into the 2023/24 tax year under the old rules, so there was the best part of a year between the practice earning the money and the partner being taxed on it. Many partners quietly liked that breathing space, because it gave time to fund the bill. The reform removes that lag: under the tax-year basis the profit and the tax year now line up much more closely, which is tidier in principle but takes away the cushion that a non-tax-year accounting date used to provide. That loss of breathing space is one of the practical reasons reserving discipline matters more now than it did, a point the reserving page develops.

The Tax-Year Basis From 2024/25

Under the new rule, profit is taxed in the tax year it arises. Where the practice's accounting date is not 31 March or 5 April, profit from two accounting periods has to be apportioned (by days, or another reasonable and consistently applied time basis) to build up the tax-year figure. A practice with a 31 March or 5 April year-end needs no apportionment at all, because its accounting year already lines up with the tax year. That is precisely why many practices considered aligning their year-end to the tax year, a point we return to below.

A quick illustration shows how the apportionment works in practice. The figures are illustrative only. Take a practice with a 30 June year-end. To build the 2024/25 tax-year figure (6 April 2024 to 5 April 2025), you take the part of the year to 30 June 2024 that falls after 5 April 2024, and add the part of the year to 30 June 2025 that falls before 6 April 2025. In other words, the tax-year profit is stitched together from slices of two different accounting periods, each weighted by the number of days that fall in the tax year. Done by days, that is a mechanical calculation; the difficulty is not the arithmetic but the timing, because one of those accounting periods may not yet be finalised when the return is due.

The Estimation Problem

Apportionment has a practical sting. If the second accounting period's accounts are not finalised by the filing deadline, the practice may have to file with provisional figures and amend the return once the final figures are known. That is more work and introduces uncertainty into the tax bill until the amendment is made. The reserving page covers how to hold money back against a figure that is not yet final, and the accounts page shows where the accounting date sits in the document.

2023/24: the Transition Year

2023/24 was the one-off transition year that moved practices with a non-tax-year accounting date onto the new basis. For a transition-year practice, the taxable amount was the standard part (the profit to its normal accounting date) plus the transition part (the profit from the end of that accounting period up to 5 April 2024). Because the transition part bridged the gap to the tax-year end, some practices were taxed on more than 12 months of profit in that single year, before overlap relief and spreading were taken into account.

2023/24 is now behind us. But the five-year spreading of the transition profit continues to 2027/28, so the transition still affects current and near-future tax bills. In other words, the one-off year has passed, but its consequences have not, which is the bridge to the spreading section below.

Overlap Relief in the Transition

Overlap relief is the relief for that overlap profit, the profit taxed twice on commencement under the old rules. The transition was the moment it was finally used. In the transition year, a partner deducted their overlap relief from their transition profit, reducing the extra amount brought into charge. And critically, overlap relief cannot be used after 2023/24. There is no later opportunity to claim it.

For many long-standing partners this was the hard part. Some had little or no overlap relief recorded, or had figures going back decades that were difficult to reconstruct, and tracking down the correct overlap figure was one of the most common transition headaches. Getting it right mattered, because an unclaimed overlap figure was relief lost for good once 2023/24 passed.

The reason the figure was so often hard to find is historical. Overlap profit was created when a partner first joined a partnership with a non-tax-year accounting date, sometimes many years or even decades ago, and the amount was recorded once and then carried forward unchanged until it was needed. If a partner had moved practices, if old returns had been archived, or if the original figure had simply never been carried into current records, reconstructing it could take real effort. HMRC operated a service to provide overlap relief figures from its records during the transition, which helped where a partner's own papers had gone cold. The wider lesson, now that the window has closed, is that overlap relief was a single, one-time deduction tied to the transition year, and there is no mechanism to revisit it later.

Spreading the Transition Profit Over Five Years

To soften the extra charge, the reform let the transition profit, after overlap relief, be spread over five tax years, from 2023/24 to 2027/28. By default, an equal fifth (20%) is treated as arising in each of the first four years, starting with 2023/24, with the balance treated as arising in the fifth year, 2027/28. So under the default, at least 20% falls in 2023/24, and a partner who does nothing simply picks up a slice each year to 2027/28.

A partner can also elect to accelerate, treating an additional amount of the transition profit as arising in an earlier year. That can make sense to use spare basic-rate band in a lower-profit year, or to avoid a larger slice landing in a year that already has other pressures. The election must be made on or before the first anniversary of the normal self assessment filing date for the tax year it relates to. Acceleration is a planning lever, not a default; whether it helps depends on your own year-by-year profit profile.

It is worth being clear about who the spread benefits and who might want to override it. The default five-year spread is broadly helpful, because it stops the whole transition charge landing in one year and pushing a partner up through the tax bands. But the spread is not automatically optimal for everyone. A partner who expects their ordinary profit to rise sharply over the spreading period, for example because they are moving up to full parity, might prefer to bring more of the transition profit forward into the earlier, lower-rate years rather than let it pile onto higher-rate years later. A partner who has a one-off low-income year (a period of reduced sessions, parental leave or a sabbatical) might similarly want to accelerate a slice into that year to use the headroom. The point is that the spread-versus-accelerate decision is a forecasting exercise across several years, and the right answer is specific to each partner's expected profit path, which is why it should be modelled rather than guessed.

Why Spreading Still Matters in 2026 and 2027

Because the default spreads to 2027/28, a partner who did not accelerate is still picking up a slice of transition profit in current bills, with the final slice in 2027/28. So this is not history; it is a live item on current and near-future returns. The remaining slices still need to be reserved for alongside the year's ordinary profit, which is exactly the kind of moving target the reserving page is built for.

The Interaction With Thresholds and the Pension

The extra transition profit in a given year does not sit in isolation. It can push a partner over an income tax threshold, into the personal-allowance taper, or into the pension annual-allowance taper for that year. That is precisely why the decision to spread or accelerate is modelled per partner rather than applied as a rule of thumb: the best answer depends on where each partner's other income sits in each year. The NHS pension annual allowance complete guide covers the pension interaction, and the complete guide covers the wider tax position; we do not re-teach the annual allowance here.

Does Basis Period Reform Mean My Practice Should Change Its Year-End?

This is the natural follow-on question, and the honest answer is "it depends". A 31 March or 5 April year-end removes the apportionment and the provisional-figures problem, which is a genuine simplification many practices value. On the other hand, changing the accounting date has its own administration and one-off effects, and a practice that has run a particular year-end for good operational reasons may not want to disturb it. Treat the year-end question as a practice-specific decision for your accountant, weighed against your circumstances, rather than a blanket recommendation. The accounts page and the complete guide give the surrounding context.

To weigh it fairly, it helps to separate the recurring benefit from the one-off cost. The recurring benefit of a tax-year-aligned accounting date is real and permanent: no apportionment to calculate each year, no need to file on provisional figures and amend later, and a cleaner match between the accounts the partners sign and the profit they are taxed on. For a practice that has wrestled with provisional figures since the reform, that simplicity is worth a good deal. The one-off side is the disruption of moving the date itself: a short or long set of accounts to bridge to the new date, the internal adjustment of budgeting and drawings cycles around a new year-end, and the partners' time to agree it. Some practices also have operational reasons for their existing date, such as aligning the accounts with a natural quiet period or with the timing of certain income, and those reasons do not disappear just because the tax rules changed. None of this points to a single right answer, which is exactly why it is a decision to model for your own practice rather than a rule to follow.

If a practice does decide to align, the timing and mechanics matter, and they interact with the transition rules above, so it is worth taking advice before acting rather than changing the date and dealing with the consequences afterwards. The GP accounting guide covers the accounting-date question from the practice's side.

Basis Period Reform and MTD: Two Separate Things

A common confusion is worth clearing up directly. Basis period reform (which profit is taxed when) is separate from Making Tax Digital for Income Tax (how you keep records and report). They arrived around the same time, but they are different rules with different scope, and being on the tax-year basis does not by itself put you into Making Tax Digital.

On Making Tax Digital specifically: general partnerships are deferred with no confirmed start date, so a GP partnership is not yet mandated at partnership level. It is wrong to say Making Tax Digital applies to GP partnerships from April 2026. A partner's own self assessment can still be caught where their personal qualifying income (for example sole-trader private or locum work) exceeds £50,000 from 6 April 2026, then £30,000 from April 2027 and £20,000 from April 2028, tested on gross qualifying income for the prior year. The complete guide covers the Making Tax Digital position in more depth.

The practical upshot is that a partner can be on the tax-year basis (as all partners now are) without being in Making Tax Digital at all, and that is the normal position for a partner whose only self-employment is the partnership. Where a partner also has sole-trader income of their own, such as private clinic work, medico-legal reports or freelance locum sessions, it is that personal income, tested against the thresholds above, that decides whether their own self assessment comes into Making Tax Digital. The partnership's deferral does not shield that personal income. So the two questions to keep separate are: "how is my partnership profit measured for tax?" (the tax-year basis, covered on this page) and "do I personally have to keep digital records and report quarterly?" (Making Tax Digital, decided by my own qualifying income). Conflating them leads partners either to worry about an obligation that does not yet apply to the partnership, or to overlook one that does apply to their private work.

What GP Partners Should Do Now

A short checklist to close on:

• Confirm your practice's accounting date and whether apportionment applies to your tax-year figure.
• Check that your overlap relief was correctly identified and used in 2023/24, because it cannot be reclaimed now.
• Know how much transition profit is still being spread and which years it falls in, including the 2027/28 slice.
• Reserve for the remaining transition slices alongside the year's ordinary tax (see the reserving page).
• Review, with your accountant, whether aligning the year-end to the tax year is worth it for your practice.
• Keep the basis-period question (which profit is taxed when) clearly separate from Making Tax Digital (how you keep records and report), and check whether any private income of your own crosses the personal Making Tax Digital thresholds.

For the filing mechanics, see the GP tax return page, and for practice accounting and the accounting date, the GP accounting guide.

How We Help GP Partnerships

Basis period reform is the sort of change that looks settled until the bill arrives. We help GP partnerships confirm their accounting-date position, check that overlap relief was used correctly while it still could be, model the remaining transition slices through to 2027/28, and weigh the spread-or-accelerate decision against each partner's own profit profile rather than applying a single rule across the practice. We also keep the basis-period question clearly separate from Making Tax Digital, so partners are not worried about an obligation that does not yet apply to them. You can read more about how we support GPs on the for GPs page, or get in touch to talk through your practice's position. The wider GP tax and accounts category collects our related guides.

This guide is general information and not advice for your specific circumstances.