Cash basis
Cash basis before 6 April 2024
From 6 April 2024, cash basis became the default method of accounting.
You can use cash basis for your records before the 2024 to 2025 tax year if you:
- run a small self-employed business, for example, sole trader or partnership
- have a turnover of £150,000 or less a year
If you have more than one business, you must use cash basis for all your businesses. The combined turnover from your businesses must be less than £150,000.
If you used cash basis and your business grew during the tax year
You can stay in the scheme up to a total business turnover of £300,000 per year. Above that, you’ll need to use traditional accounting for your next tax return.
Who cannot use the scheme for records before the 2024 to 2025 tax year
Limited companies and limited liability partnerships cannot use cash basis.
You also cannot use cash basis if you’re a:
- Lloyd’s underwriter
- farming business with a current herd basis election
- farming or creative business with a fluctuating profit averaging claim
- business that has claimed business premises renovation allowance within the previous 7 years
- business that carries on a mineral extraction trade
- business that has ever claimed research and development allowance
If you cannot use cash basis, you’ll need to use traditional accounting to work out your taxable profits.
When cash basis might not suit your business
Some businesses may choose to use traditional accounting instead because it means they can use different rules to calculate their profits. These rules apply if the business:
- deals in securities
- claims relief for mineral royalties
- leases premiums
- is a minister of religion
- pays pool betting duty
- is an intermediary treated as making employment payments
- is a managed service company
- makes waste disposals
- is a cemetery or crematoria
If you use cash basis you’ll not be able to use these rules.
Sending your tax return
If you’ve used cash basis, you’ll need to let us know when you send your Self Assessment tax return.