Consultation | Extending income tax cash basis for the self-employed

Views sought on proposals to increase eligibility and use of the income tax cash basis for the self-employed.

This HM Revenue & Customs (HMRC) consultation seeks views and feedback on proposals to increase eligibility and use of the income tax cash basis for the self-employed. These proposals aim to increase the number of businesses able to benefit from the simplifications the regime offers, making the rules easier to apply and understand, and to help businesses spend less time filing their tax returns.

What is income tax cash basis?

The cash basis is a simplified regime for calculating taxable profits for businesses with straightforward tax affairs. The regime allows businesses to calculate their taxable profit as the difference between income and expenditure when money is actually received or paid out. This eliminates accounting and tax complexities such as accruals and most capital allowances and simplifies reporting.

Four policy proposals

The consultation will focus on the four following policy proposals, but welcomes other ideas:

• increasing the turnover thresholds for businesses to use the cash basis
• setting the cash basis as the default, with an opt-out for accruals
• increasing the £500 limit on interest deductions in the cash basis
• relaxing restrictions on using relief for losses made in the cash basis

Who should respond to this consultation?

HMRC would like to hear from businesses, particularly self-employed businesses that use or would be eligible for the cash basis, their advisers, representative bodies, software providers, and other interested parties.

Deadline for responses

How to respond to this consultation

Any responses to or queries about this consultation should be directed by email to businessprofits.admin@hmrc.gov.uk. Please include ‘Cash basis’ in your email subject line.

Read full details on expanding the cash basis consultation.

First published 22 March 2023