Jennifer Adams considers the tax implications for a business if invoices are not paid.
Bad debts pose a significant challenge for every business. Swoop Funding's 2025 UK business debt report (April 2025) revealed that the average debt per company stands at £365,375 – funds that could otherwise maintain healthy cashflow and financial stability for the business. Therefore, staying on top of non-payments is essential.
However, every business will eventually encounter debts that cannot be collected. Writing off bad debts comes with specific tax implications that vary based on whether the debts are trading or non-trading, and whether the business operates as a company, sole trader, or partnership.
When can a claim be made?
Bad debt deductions are relevant only for businesses using the accruals method of accounting, as income from credit sales is
