From April 2024, the cash basis is the default method for sole traders and most partnerships when preparing Self-Assessment returns. Designed to simplify tax reporting, the cash basis lets businesses record income and expenses when money actually moves, easing the admin burden for many. Those who prefer or need traditional accruals accounting must actively opt out when submitting their tax 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.

A number of other changes to the cash basis took effect from April 2024. This included 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 are 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.