Cash basis
Who can use cash basis
You can use cash basis 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.
From 6 April 2024, cash basis will become the default method of accounting. You must opt out if you want to use traditional accounting or cannot use cash basis accounting.
If you use cash basis and your business grows 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
Limited companies and limited liability partnerships cannot use cash basis.
There are also some specific types of businesses that cannot use the scheme:
- Lloyd’s underwriters
- farming businesses with a current herd basis election
- farming and creative businesses with a section 221 ITTOIA profit averaging election
- businesses that have claimed business premises renovation allowance
- businesses that carry on a mineral extraction trade
- businesses that have claimed research and development allowance
- dealers in securities
- relief for mineral royalties
- lease premiums
- ministers of religion
- pool betting duty
- intermediaries treated as making employment payments
- managed service companies
- waste disposal
- cemeteries and crematoria
If you cannot use cash basis, you’ll need to use traditional accounting to work out your taxable profits.