Sarah Bradford looks at the cash basis and when it may be beneficial.
In preparation for the introduction of making tax digital for income tax self-assessment (MTD ITSA), HMRC has recently consulted on how best to implement reforms to the basis period rules.
The existing current year basis is to be replaced with a tax year (actual) basis from 2023/24; 2022/23 will be the transition year.
Existing rules
Under the existing rules, once an unincorporated business is established, it is taxed on a current year basis. This means that the profits of the business that are taxed in a particular tax year are those for the accounting period that ends in that tax year.
Example 1: Existing rules: accounting date 30 September
Violet is a
