Using Cash Basis Accounting
There are important changes to the rules on cash basis accounting, aimed at driving many more businesses into using the scheme.
As a result, most unincorporated businesses will need to decide what to do next. We look at the factors involved, and what moving to the cash basis might mean for you.
Change from 6 April 2024 makes cash basis the default method of calculating profits for trading income for Income Tax, rather than the traditional accruals basis. The move turns the previous position upside down. Businesses now have to opt out of cash basis, whereas previously, they had to opt in.
In a second major move, the cash basis regime itself has been given a considerable makeover. Key restrictions under the old regime have been lifted, making cash basis more viable for a wider range of businesses.
For the avoidance of confusion: the cash basis rules used by landlords, and the cash accounting scheme for VAT are separate regimes, and there are no changes to either of these.