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.

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 can’t use the scheme

Limited companies and limited liability partnerships can’t use cash basis.

There are also some specific types of businesses that can’t 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 can’t use cash basis, you’ll need to use traditional accounting to work out your taxable profits.