{"id":119,"date":"2019-05-28T14:06:45","date_gmt":"2019-05-28T13:06:45","guid":{"rendered":"https:\/\/taxfix.com\/en-uk\/?p=119"},"modified":"2026-03-18T12:10:27","modified_gmt":"2026-03-18T12:10:27","slug":"self-employed-cash-basis-traditional-accounting","status":"publish","type":"post","link":"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/","title":{"rendered":"Self-employed: cash basis or traditional accounting?"},"content":{"rendered":"\n<p>When you <a href=\"https:\/\/taxfix.com\/en-uk\/register-as-self-employed\/\">register as self-employed with HMRC<\/a> you\u2019ll have to choose which type of accounting you prefer: cash basis or traditional.<\/p>\n\n\n\n<p><a href=\"https:\/\/taxfix.com\/en-uk\/glossary\/cash-basis\/\">Cash basis<\/a> is suitable for most self-employed people. It&#8217;s simple and makes your taxes easier to declare. <\/p>\n\n\n\n<p>Nonetheless, let\u2019s have a quick look at the differences!<\/p>\n\n\n<\/div> <!-- .c-body -->\n\n<div class=\"b-cta-mini m-blue m-align-left\">\n    \n    <div class=\"b-cta-mini__content\">\n\n        \n        \n        <div class=\"b-cta-mini__body\">\n            <div class=\"b-block-body\"><p><span class=\"notion-enable-hover\" data-token-index=\"0\">Our <strong>Making Tax Digital (MTD) software<\/strong> for landlords and sole-traders with built-in accountant support is now live. <strong>First month for free!<\/strong><br \/>\n<\/span><!-- notionvc: 227cc3b6-c5da-4b2e-bf21-eb65dbbc1eac --><\/p>\n<ul>\n<li>Accountant-led onboarding &amp; support<\/li>\n<li>Simple-to-use software<\/li>\n<li>Affordable pricing options \u2013 from \u00a324.99\/month<\/li>\n<\/ul>\n<\/div>\n        <\/div>\n\n        \n        \n        <div class=\"b-cta-mini__action\">\n\n            <a href=\"https:\/\/taxfix.com\/en-uk\/mtd-for-itsa\/\" class=\"c-button m-large  m-mobile-fullwidth\">Learn more<\/a>\n\n\n        <\/div>\n\n        \n    <\/div>\n<\/div> <!-- .b-cta-mini -->\n\n<div class=\"c-body\">\n\n\n\n\n<h2 class=\"wp-block-heading\">Traditional accounting<\/h2>\n\n\n\n<p>This is when you record your income and expenditure regardless of whether or not you&#8217;ve actually been paid for the work. Basically, you use your <a href=\"https:\/\/taxfix.com\/en-uk\/glossary\/invoice\/\">invoices<\/a> instead of bank statements to record your income. This is known as accrual-based accounting.<\/p>\n\n\n\n<p>Confused? Luckily we\u2019ve got an example. But first, here&#8217;s how the tax year works &#8211; dates, deadlines, the whole shebang. <\/p>\n\n\n<\/div> <!-- .c-body -->\n\n<div class=\"b-highlight-mini m-neutral m-align-left\">\n    <div class=\"b-block-body\">\n        <p><span style=\"font-weight: 400;\">Key dates in the current <\/span><b>2025\/26 tax year \ud83d\udc47<\/b><\/p>\n<table>\n<tbody>\n<tr>\n<td><b>Deadline<\/b><\/td>\n<td><b>Date<\/b><\/td>\n<td><b>Year<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Tax year starts<\/span><\/td>\n<td><span style=\"font-weight: 400;\">6th April<\/span><\/td>\n<td><span style=\"font-weight: 400;\">2025<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Tax year ends<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5th April<\/span><\/td>\n<td><span style=\"font-weight: 400;\">2026<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Register for self assessment<\/span><\/td>\n<td><span style=\"font-weight: 400;\">5th October<\/span><\/td>\n<td><span style=\"font-weight: 400;\">2026<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Pay tax bill by PAYE salary<\/span><\/td>\n<td><span style=\"font-weight: 400;\">30th December<\/span><\/td>\n<td><span style=\"font-weight: 400;\">2026<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Self assessment deadline<\/span><\/td>\n<td><span style=\"font-weight: 400;\">31st January<\/span><\/td>\n<td><span style=\"font-weight: 400;\">2027<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n    <\/div>\n<\/div> <!-- .b-highlight-mini -->\n\n<div class=\"c-body\">\n\n\n\n\n\n<p>So now, how accrual-based accounting works. <\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>You invoice a customer on March 25th <\/li>\n\n\n\n<li>The customer pays you on April 18th <\/li>\n\n\n\n<li>April 18th falls into a different tax year from when you invoiced<\/li>\n\n\n\n<li>Accrual-based accounting means you file based on when you invoiced, not when you&#8217;re paid<\/li>\n<\/ul>\n\n\n\n<p>There are a few advantages to the traditional accounting method:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>You can <a href=\"https:\/\/taxfix.com\/en-uk\/glossary\/offsetting\/\">offset losses<\/a>&nbsp;<\/li>\n\n\n\n<li>It\u2019s easier to deal with VAT<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Cash basis accounting<\/h2>\n\n\n\n<p>This method is actually much more simple and particularly ideal for those who run a small business. Sole traders will also benefit from cash basis accounting.&nbsp;<\/p>\n\n\n\n<p>All you have to do is record your income or expenses when you actually receive or pay money into your bank. Now come the end of the tax year, you will only pay income tax on money received in your <a href=\"https:\/\/www.gov.uk\/corporation-tax-accounting-period\">accounting period<\/a>.<\/p>\n\n\n\n<p>Let\u2019s look at the same scenario now, but using the cash basis accounting method:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>You invoice a customer on March 25th <\/li>\n\n\n\n<li>The customer pays you on April 18th <\/li>\n\n\n\n<li>April 18th falls into a different tax year from when you invoiced<\/li>\n\n\n\n<li>Cash basis accounting means you file based on when you&#8217;re paid<\/li>\n<\/ul>\n\n\n\n<p>FYI: You can still claim capital allowances and allowable business expenses when using cash basis accounting. Find out more about what is generally accepted <a href=\"https:\/\/www.gov.uk\/simpler-income-tax-cash-basis\/income-and-expenses-under-cash-basis\">here<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The Simplified Expenses Scheme<\/h2>\n\n\n\n<p>This is a way of calculating some of your business expenses using flat rates. You can choose this only if you also use cash basis accounting.<\/p>\n\n\n\n<p>You can use flat rates for:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Your car (the <a href=\"https:\/\/taxfix.com\/en-uk\/glossary\/mileage-allowance\/\">mileage allowance<\/a>) \ud83d\ude97<\/li>\n\n\n\n<li>Working from home (the home office allowance) \ud83c\udfe0<\/li>\n<\/ul>\n\n\n\n<p><a href=\"https:\/\/taxfix.com\/en-uk\/list-self-employment-allowances\/\">Read more details about these flat rates here.<\/a><\/p>\n\n\n\n<p>For everything else, working them out as you would normally should do the trick!<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<div class=\"embed-container\"><iframe loading=\"lazy\" title=\"Tax in 10(ish) seconds - what are expenses?\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/H2yyiSfSdoE?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/div>\n<\/div><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Which one should you choose?<\/h2>\n\n\n\n<p>Of course, different methods work differently for everyone but we think this time cash basis accounting takes the winning spot. It\u2019s just so much more simple and who doesn\u2019t love simplicity?<\/p>\n\n\n\n<p>\ud83d\udea8 Bear in mind though, if your earnings from self-employment are over \u00a3150,00 &#8211; you can use traditional accounting only. In this case, we\u2019d recommend setting up a limited company instead. \ud83d\udea8<\/p>\n","protected":false},"excerpt":{"rendered":"<p>When you register as self-employed with HMRC you\u2019ll have to choose which type of accounting you prefer: cash basis or traditional. Cash basis is suitable for most self-employed people. It&#8217;s simple and makes your taxes easier to declare. Nonetheless, let\u2019s have a quick look at the differences! Traditional accounting This is when you record your [&hellip;]<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[441,440],"tags":[413,356,411,415],"class_list":["post-119","post","type-post","status-publish","format-standard","hentry","category-general-self-employed-tax-faqs","category-self-employed-tax-returns","tag-accounting","tag-expenses","tag-self-employed","tag-tax-return-basics"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Self-employed: cash basis or traditional accounting? &#8211; Taxfix<\/title>\n<meta name=\"description\" content=\"When you register as self-employed, you must choose between cash basis and traditional accounting. Find out the pros and cons of both here.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Self-employed: cash basis or traditional accounting? &#8211; Taxfix\" \/>\n<meta property=\"og:description\" content=\"When you register as self-employed, you must choose between cash basis and traditional accounting. Find out the pros and cons of both here.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/\" \/>\n<meta property=\"og:site_name\" content=\"Taxfix\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/taxfix_uk\" \/>\n<meta property=\"article:published_time\" content=\"2019-05-28T13:06:45+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-03-18T12:10:27+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/taxfix.com\/en-uk\/wp-content\/uploads\/eyJhc3NldF9pZCI6NTY3OH0_taxfix-gmbh_UwIjumOzeyPqNyDgJ1bVY_OROVADgg2mBtzSX1XQ7A0.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"628\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Gemma Doswell\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@Taxfix\" \/>\n<meta name=\"twitter:site\" content=\"@Taxfix\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/\",\"url\":\"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/\",\"name\":\"Self-employed: cash basis or traditional accounting? &#8211; Taxfix\",\"isPartOf\":{\"@id\":\"https:\/\/taxfix.com\/en-uk\/#website\"},\"datePublished\":\"2019-05-28T13:06:45+00:00\",\"dateModified\":\"2026-03-18T12:10:27+00:00\",\"author\":{\"@id\":\"https:\/\/taxfix.com\/en-uk\/#\/schema\/person\/008d0d859b00d5809e35d143dff5dd4a\"},\"description\":\"When you register as self-employed, you must choose between cash basis and traditional accounting. Find out the pros and cons of both here.\",\"breadcrumb\":{\"@id\":\"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/#breadcrumb\"},\"inLanguage\":\"en-GB\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/taxfix.com\/en-uk\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Self-employed: cash basis or traditional accounting?\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/taxfix.com\/en-uk\/#website\",\"url\":\"https:\/\/taxfix.com\/en-uk\/\",\"name\":\"Taxfix\",\"description\":\"Taxes as they should be done\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/taxfix.com\/en-uk\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-GB\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/taxfix.com\/en-uk\/#\/schema\/person\/008d0d859b00d5809e35d143dff5dd4a\",\"name\":\"Gemma Doswell\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-GB\",\"@id\":\"https:\/\/taxfix.com\/en-uk\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/0ee123e7e4df1efafc651aa2721860dbf529c4458f2fd6d13cdb62e8f05ffc2f?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/0ee123e7e4df1efafc651aa2721860dbf529c4458f2fd6d13cdb62e8f05ffc2f?s=96&d=mm&r=g\",\"caption\":\"Gemma Doswell\"}}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Self-employed: cash basis or traditional accounting? &#8211; Taxfix","description":"When you register as self-employed, you must choose between cash basis and traditional accounting. Find out the pros and cons of both here.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/","og_locale":"en_GB","og_type":"article","og_title":"Self-employed: cash basis or traditional accounting? &#8211; Taxfix","og_description":"When you register as self-employed, you must choose between cash basis and traditional accounting. Find out the pros and cons of both here.","og_url":"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/","og_site_name":"Taxfix","article_publisher":"https:\/\/www.facebook.com\/taxfix_uk","article_published_time":"2019-05-28T13:06:45+00:00","article_modified_time":"2026-03-18T12:10:27+00:00","og_image":[{"width":1200,"height":628,"url":"https:\/\/taxfix.com\/en-uk\/wp-content\/uploads\/eyJhc3NldF9pZCI6NTY3OH0_taxfix-gmbh_UwIjumOzeyPqNyDgJ1bVY_OROVADgg2mBtzSX1XQ7A0.jpg","type":"image\/jpeg"}],"author":"Gemma Doswell","twitter_card":"summary_large_image","twitter_creator":"@Taxfix","twitter_site":"@Taxfix","schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/","url":"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/","name":"Self-employed: cash basis or traditional accounting? &#8211; Taxfix","isPartOf":{"@id":"https:\/\/taxfix.com\/en-uk\/#website"},"datePublished":"2019-05-28T13:06:45+00:00","dateModified":"2026-03-18T12:10:27+00:00","author":{"@id":"https:\/\/taxfix.com\/en-uk\/#\/schema\/person\/008d0d859b00d5809e35d143dff5dd4a"},"description":"When you register as self-employed, you must choose between cash basis and traditional accounting. Find out the pros and cons of both here.","breadcrumb":{"@id":"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/#breadcrumb"},"inLanguage":"en-GB","potentialAction":[{"@type":"ReadAction","target":["https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/taxfix.com\/en-uk\/self-employed-tax-returns\/self-employed-cash-basis-traditional-accounting\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/taxfix.com\/en-uk\/"},{"@type":"ListItem","position":2,"name":"Self-employed: cash basis or traditional accounting?"}]},{"@type":"WebSite","@id":"https:\/\/taxfix.com\/en-uk\/#website","url":"https:\/\/taxfix.com\/en-uk\/","name":"Taxfix","description":"Taxes as they should be done","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/taxfix.com\/en-uk\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-GB"},{"@type":"Person","@id":"https:\/\/taxfix.com\/en-uk\/#\/schema\/person\/008d0d859b00d5809e35d143dff5dd4a","name":"Gemma Doswell","image":{"@type":"ImageObject","inLanguage":"en-GB","@id":"https:\/\/taxfix.com\/en-uk\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/0ee123e7e4df1efafc651aa2721860dbf529c4458f2fd6d13cdb62e8f05ffc2f?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/0ee123e7e4df1efafc651aa2721860dbf529c4458f2fd6d13cdb62e8f05ffc2f?s=96&d=mm&r=g","caption":"Gemma Doswell"}}]}},"_links":{"self":[{"href":"https:\/\/taxfix.com\/en-uk\/wp-json\/wp\/v2\/posts\/119","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxfix.com\/en-uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxfix.com\/en-uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxfix.com\/en-uk\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/taxfix.com\/en-uk\/wp-json\/wp\/v2\/comments?post=119"}],"version-history":[{"count":17,"href":"https:\/\/taxfix.com\/en-uk\/wp-json\/wp\/v2\/posts\/119\/revisions"}],"predecessor-version":[{"id":45159,"href":"https:\/\/taxfix.com\/en-uk\/wp-json\/wp\/v2\/posts\/119\/revisions\/45159"}],"wp:attachment":[{"href":"https:\/\/taxfix.com\/en-uk\/wp-json\/wp\/v2\/media?parent=119"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxfix.com\/en-uk\/wp-json\/wp\/v2\/categories?post=119"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxfix.com\/en-uk\/wp-json\/wp\/v2\/tags?post=119"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}