The cash basis is a simplified accounting basis under which profit is worked out by reference to cash in and out rather than by reference to income earned and expenses incurred in the period (as under the accruals basis). The cash basis has been optional since 2013 for businesses with turnover under the VAT registration threshold.
As part of the Making Tax Digital reforms the cash basis threshold has been increased to £150,000 from 6 April 2017, extending its availability. It will also be the default basis for unincorporated landlords with income from property of £150,000 a year or less. Changes have also been made to the way in which capital expenditure is treated for the purposes of the cash basis to make the rules easier to operate.
If you are self-employed or running an unincorporated business and your turnover is less than £150,000 and you do not currently use the cash basis, contact us to discuss whether this may be for you. Unincorporated landlords with rental income of £150,000 or less should also discuss what the move to the cash means for their business.