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From 6 April 2024,聽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 拢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 拢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 拢300,000 per year. Above that, you鈥檒l need to use聽traditional accounting聽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鈥檙e a:

• Lloyd鈥檚 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鈥檒l need to use聽traditional accounting聽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鈥檒l not be able to use these rules.

Sending your tax return

If you鈥檝e used cash basis, you鈥檒l need to let us know when you send your Self Assessment tax return.