Cash basis
VAT registered businesses
You can start to use cash basis if you’re VAT registered as long as your income is £150,000 or less during the tax year.
You can record your business income and expenses either excluding or including VAT. However, you must treat income and expenses the same way.
If you choose to include VAT, you have to record:
- VAT payments you make to HM Revenue and Customs (HMRC) as expenses
- VAT repayments you receive from HMRC as income
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.