From the tax year 2013-14 small businesses (sole traders and partnerships NOT limited companies) with a turnover of £79,000 or less can work out their income and expenses for self assessment using the Cash Basis.
The Cash Basis approaches differs from the standard Accruals Basis in that income and expenditure are recorded when received / paid instead of sales and purchases being recorded according to their invoice date and the period to which they relate. Cash basis may be preferable for a small business as they will not have to pay tax at the end of the tax year on money not yet received.
Small businesses who opt for Cash Basis accounting can use this method until their income increases to £158,000 after which they will need to use the traditional accruals (invoice date) basis.
Cash basis may not be suitable for certain businesses.
If you think cash basis accounting may be appropriate for your business and wish to discuss your options we can help.