Joe Brough explains how the transitional rules should be applied when eligible businesses make the switch from accruals accounting to cash accounting following their change to the default basis of calculating taxable profits from 2024/25.
For tax years preceding 2024/25, a business could only enter the cash basis if its turnover was less than £150,000 per year, and it had to leave once its turnover exceeded £300,000.
From the start of the 2024/25 tax year, the turnover threshold has been removed, with the cash basis being made the default way for businesses to calculate their taxable profits, although accrual accounting can still be used should a business wish to do so.
Not all businesses are eligible to use the cash basis. The full list of excluded trades is provided in ITTOIA 2005, s 25B, and includes the following:
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companies;
