Cash basis ― overview

Produced by a Tolley Owner-Managed Businesses expert

Owner-Managed Businesses

Guidance

This guidance note sets out the principles of using cash basis accounting for unincorporated businesses. Cash basis is a simplified form of accounting and it is intended to make the calculation of trading profits easier by accounting for income and expenditure based on money received from customers and money paid to suppliers.

Cash basis for trading businesses from 2024/25

Finance Act 2024, introduces an expansion of the cash basis for self-employed taxpayers including those in partnerships from the tax year 2024/25. The changes do not apply for property businesses, companies or those entities already excluded from the current cash basis regime.

Prior to 2024/25 the default method for calculating profits of trading businesses was the accruals basis and in order to use the simpler cash basis businesses had to opt in. The changes make the cash basis the default method of calculating profits and businesses have to opt to use the accrual basis instead. The election has effect for the tax year for which it is made and for any subsequent tax year.

Before the changes in

Continue reading the full document

To gain access to additional expert tax guidance, workflow tools, and tax research, register for a free trial of Tolley+™

TAKE A FREE TRIAL NOW

Popular Articles

Owner-Managed Businesses

Trade or hobby

Trade or hobbyInteraction of hobby farming rules and commercialityFarming has its own set of ‘hobby farming rules’, which historically have stated that a profit must be made every six years. This is known as ‘the five-year rule’, in that there can be five years of losses but there must be a profit

14 Jul 2020 13:50 | Produced by Tolley Read more

Owner-Managed Businesses

Class 4 national insurance contributions

Class 4 national insurance contributionsWhat is Class 4 NIC?Class 2 and Class 4 national insurance contributions (NIC) are paid by self-employed individuals and partners in a partnership on their profits arising within the UK. This guidance note considers Class 4 contributions. For Class 2

14 Jul 2020 11:13 | Produced by Tolley Read more

Employment Tax

Loans written off

Loans written offCompanies sometimes provide directors, employees or shareholders with low interest or interest-free loans either as part of the reward package or on special occasions to help the individual meet significant expenditure. The employment income implications of these loans are discussed

14 Jul 2020 12:11 | Produced by Tolley Read more

��Ӱ��