Cash basis
How to record income and expenses
You must keep records of all business income and expenses. You바카라 사이트檒l need to report these on your Self Assessment tax return to work out your profit.
Recording income
Only record income you actually receive. Do not count any money you바카라 사이트檙e owed but have not yet received.
You can choose how you record when money is received or paid (for example, the date the money enters your account or the date a cheque is written), but you must use the same method each tax return.
All payments count - cash, card, cheque, payment in kind, or any other method.
Example
You invoiced someone on 15 March 2024 but did not receive the money until 30 April 2024. Record this income as received on 30 April 2024.
Recording expenses
Expenses are business costs you can deduct from your income to calculate your taxable profit. This means your allowable expenses reduce your Income Tax.
Only count the expenses you바카라 사이트檝e actually paid.
Examples of allowable business expenses if you use cash basis are:
- day to day running costs, such as electricity and fuel
- admin costs, for example, stationery
- training costs to help you run your business
- things you use in your business - for example, machinery, computers and vans (there are different rules for cars)
- interest and bank charges, for example, interest on bank overdrafts
- buying goods for resale
You can check what else counts as an allowable expense.
You can also choose to use the simplified expenses scheme instead of calculating expenses for:
- running a vehicle
- working from home
- making adjustments for living on your business premises
Cars and other equipment
If you buy a car for your business, you can claim the purchase as a capital allowance (but only if you바카라 사이트檙e not using simplified expenses to work out your business expenses for that vehicle).
Unlike traditional accounting, you claim the cost of other equipment you buy to keep and use in your business as a normal allowable business expense rather than as a capital allowance.
If you바카라 사이트檙e currently claiming capital allowances and want to switch to cash basis, find out what changes you need to make.
VAT registered businesses
You can record your business income and expenses either excluding or including VAT. However, you must treat income and expenses the same way.
If you choose to include VAT, you have to record:
- VAT payments you make to HM Revenue and Customs (HMRC) as expenses
- VAT repayments you receive from聽HMRC聽as income
Keep your records
You do not need to send your records to HMRC when you send in your tax return, but you must keep them in case HMRC ask to check your records.