Overlap Relief: Claim Tax Relief When Going Self-Employed

What Is Overlap Relief and Why Does It Matter?

When you first became self-employed, HMRC may have taxed some of your profits twice. This happened under the old 'current year basis' rules, where your opening accounting period often overlapped with the standard tax year. The extra profits taxed in those early years are called overlap profits, and the relief you can claim against them is called overlap relief.

From the 2024/25 tax year onwards, HMRC moved all sole traders and partnerships to a tax year basis, meaning your taxable profits are now aligned directly to the 6 April to 5 April tax year. During the 2023/24 transition year, HMRC allowed any outstanding overlap relief to be used automatically. However, if you didn't use it then, or if you're still working through your records, it's important to understand your position.

Who Is Affected?

Overlap relief is relevant to you if:

• You started self-employment before 6 April 2024 with a non-April accounting year-end (for example, 31 December or 31 March)
• Your early trading periods overlapped with the standard tax year
• You did not fully use your overlap relief during the 2023/24 transition year

If you started trading on or after 6 April 2024, you are already on the tax year basis from day one, so overlap relief does not apply to you.

How to Find Your Overlap Profit Figure

Your overlap profits should have been recorded when you first registered as self-employed. Check your:

• Previous Self Assessment tax returns (SA103 supplementary pages)
• Records from your accountant or bookkeeper
• Any correspondence from HMRC when you first started trading

If you cannot locate the figure, contact HMRC directly on 0300 200 3310 or use your online Self Assessment account. HMRC holds records of overlap profits for most traders, though it may take time to retrieve older figures.

How Overlap Relief Was Applied in the Transition Year

During the 2023/24 transition year, HMRC gave sole traders with non-April year-ends an extended accounting period covering from the end of their usual accounting date all the way to 5 April 2024. Any outstanding overlap relief was deducted from the transitional profits in that year, reducing your tax bill. If you filed your 2023/24 Self Assessment return correctly, this should already be reflected.

Transitional profits that pushed your income significantly higher could also be spread over five tax years (2023/24 to 2027/28) to soften the impact. If you elected to spread and have overlap relief remaining, speak to a tax adviser to confirm how this interacts with your spread amounts.

What If You Didn't Claim It?

If you believe you had overlap profits but did not claim relief during the transition year, you may be able to amend your 2023/24 Self Assessment return. You have until 31 January 2026 to amend that return — if that deadline has passed, contact HMRC to discuss your options, as a late claim may still be possible in limited circumstances.

Practical Steps to Take Now

• Locate your overlap profit figure from past returns or HMRC records
• Check your 2023/24 return to confirm the relief was claimed correctly
• If you spread your transitional profits, ensure future returns reflect the correct annual instalment
• Speak to a tax adviser if your situation is complex, particularly if you changed accounting dates more than once

The Bottom Line

Overlap relief was designed to ensure you never permanently pay tax on the same profits twice. With the basis period reform now fully in effect, most overlap relief has been — or should have been — used. If you're unsure whether you claimed everything you were entitled to, act quickly. Reviewing your records now could save you a meaningful sum and give you complete peace of mind going forward.