Policy paper

Expanding the Income Tax cash basis for self-employed individuals and partnerships

This tax information and impact note details legislation introduced to expand the income tax cash basis for the self-employed and partnerships, and to set the cash basis as the default method of calculating trading profits.

• From: HM Revenue & Customs
• Published: 22 November 2023

Documents

Expanding the cash basis

HTML

Details

This measure changes how the cash basis operates for trading income.

Current rules set the accruals basis as the default method of calculation, and restrict which businesses are able to use the cash basis through turnover-based entry and exit thresholds. The current rules also set specific restrictions on deductions against profits for interest costs, and set specific restrictions on the use of loss relief for losses generated under the cash basis.

This measure sets the cash basis as the default method of calculating trading profits for eligible businesses, with an opt-out for accruals. It also removes the entry and exit thresholds based on turnover, and removes restrictions specific to the cash basis on interest deductions and loss relief. Read the cash basis consultation and outcome.

Published 22 November 2023