Stratford-upon-Avon
13 The Courtyard
Timothy's Bridge Road
Stratford-Upon-Avon
Warwickshire CV37 9NP
The cash basis is now the default for self-employed income reporting. Learn about the key updates, opt-out options, and how this simplified method can ease your self-assessment obligations with HMRC.
The cash basis is used by sole traders and other unincorporated businesses to determine their income and expenses for self-assessment. This simplified method can ease record-keeping and income reporting to HMRC, whilst still providing a suitable measure of profits for many businesses.
Since 6 April 2024, the cash basis has become the default method for calculating income and expenses for self-employed individuals and partnerships when filing their Income Tax self-assessment return.
Businesses that prefer traditional accruals accounting or who are ineligible for the cash basis, must opt out of the cash basis when submitting their self-assessment return. The first return requiring this decision will be the 2024-25 return, due by 31 January 2026.
There have also been a number of other changes to the cash basis that took effect for the current 2024-25 tax year. This includes the following:
- The removal of the turnover thresholds for businesses to use the cash basis.
- The removal of the restrictions on using relief for losses made in the cash basis, aligning the rules with accruals.
- Interest restrictions have been removed so both cash basis and accruals accounting are subject to the same tax rules.
- People with more than one business will be able to choose whether they use the cash basis or accruals accounting for each business they have, rather than having to pick one method for all their businesses.
The cash basis is not available to limited companies and limited liability partnerships.
Grenfell James Technology Adoption Index
How does your business perform against others adopting financial tech? Find out with our interactive diagnostic:
1.
How does your business receive invoices?
A)
Invoices are mainly received in paper form
B)
Invoices are mainly received by email
C)
Invoices are emailed then automatically forwarded to a designated mailbox
2.
How are purchase invoices processed?
A)
Invoices are entered manually
B)
Invoices are attached to manually raised invoices
C)
Automated software (e.g. ReceiptBank, 1Tap, HubDoc etc) collates invoices
3.
How are accounts processed?
A)
Using Excel/paper-based
B)
Using Computer-based, offline software
C)
Using cloud-based accountancy software
4.
How often is business data revised?
A)
Data is updated annually
B)
Data is updated quarterly
C)
Data is updated monthly or more often
5.
How is banking updated for your business?
A)
Banking is updated manually
B)
Banking is updated by imports
C)
Banking is updated via a live feed
6.
How are bank payments made?
A)
Bank payments are manual
B)
Bank payments are made using bulk imports
C)
Bank payments are made directly via accounting software
7.
How are bank receipts reconciled?
A)
Receipts are chased and reconciled manually
B)
Receipts are chased and reconciled automatically
C)
A third-party platform is used to chase debts and collect fees
8.
How often are management reports produced?
A)
No reports are provided
B)
Reports are provided but often too late to be valuable
C)
Reports are automated with real-time information
Score 8-12:
Curious Exploration
Your financial technology phase is Curious Exploration
% of respondent businesses are in this phase too.
Switching accountancy systems may seem like an upheaval, but can be much more straightforward than most businesses imagine. From talking to our clients, they have found moving from paper invoicing and desktop-based accounting software to the cloud and apps quickly makes the transition process a worthwhile investment of time. Digital accounting solutions bring in streamlined processes, up-to-date business data and greater confidence in the accuracy of information when making financial decisions.
Grenfell James works with your team to fully assess the needs of your business and minimise the impact of any transitions for solutions we recommend.
Score 13-19:
Measured Discovery
Your financial technology phase is Measured Discovery
% of respondent businesses are in this phase too.
Once cloud accountancy software is in place, there’s still plenty of scope to improve your accountancy processes and make sure your business is maximising the benefits of adopting a digital accounting solution. Grenfell James assesses each business to understand how any implemented solutions are being used, identify areas for improvement and the needs of the business overall to support your business goals and achieve success.
Our team of experts can discuss a range of time-saving automation and get different apps and cloud-based solutions talking to create and manage a digital accountancy eco-system to help your business grow.
Score 20-24:
Bold Innovation
Your financial technology phase is Bold Innovation
% of respondent businesses are in this phase too.
You know the benefits of accounting technology and the impact it can have on your business goals. If you want to take it a step further, our team can conduct a systematic review of your processes, apps and business goals to ensure your digital accountancy ecosystem is keeping pace with the changing needs of a growing business.