Cash Basis Accounting Calculator 2026 (Self-Employed)

Compare cash basis vs accruals accounting for sole traders. Mandatory cash basis from April 2024. Calculate the tax difference and understand which method suits you.

Cash Basis vs Accruals Accounting Calculator 2026

Cash basis became mandatory for most sole traders from 6 April 2024. Compare your taxable profit under both methods to understand the difference.

Cash Received & Paid During Tax Year

Total cash received from customers (£) Total cash paid for expenses (£) Capital item purchases paid (£) — fully deductible under cash basis

Accruals Adjustments (for comparison)

Debtors at year-end (amounts owed to you, not yet received) (£) Creditors at year-end (amounts you owe but not yet paid) (£) Capital allowances (AIA deduction under accruals) (£)

Income Tax Rate (%)

Frequently Asked Questions

Is cash basis now mandatory for sole traders?

From 6 April 2024, the default accounting method for most sole traders and partnerships is cash basis. You can elect out to use accruals (traditional accounting) if preferred.

What is the key difference between cash basis and accruals?

Under cash basis, income is recognised when received and expenses when paid. Under accruals, income is recognised when earned (invoiced) and expenses when incurred, regardless of payment timing.

What is the turnover limit for cash basis?

There is no longer a universal turnover limit under the new mandatory cash basis rules from April 2024. Previously the limit was £150,000 (rising to £300,000). You can opt out and use accruals if you prefer.

Can I deduct capital expenditure under cash basis?

Yes — under cash basis, most capital items (equipment, tools, vehicles) are deductible in full when paid. You cannot also claim capital allowances on the same items. Exception: land, property, cars.

Can I use simplified mileage AND cash basis?

Yes. Simplified mileage rates and cash basis can be used together. Many sole traders use both to simplify their tax returns significantly.

What types of businesses cannot use cash basis?

Companies (limited companies), LLPs, Lloyd's underwriters, certain farming businesses electing the herd basis, and businesses with partnership agreements requiring accruals accounting are excluded.

How does the transition from accruals to cash basis work?

On transition, you add your debtors at the changeover date to your first cash basis year's income, and add your creditors to that year's expenses. HMRC guidance (BIM70005) covers transitional adjustments in detail.

Is VAT treated differently under cash basis?

Your income and expenses for income tax purposes are the cash amounts including VAT if you're not VAT-registered, or ex-VAT amounts if VAT-registered. Cash basis for income tax is separate from VAT cash accounting.