Good News, The Cash Basis Threshold Has Increased…
As announced at the 2017 Spring Budget, the threshold for traders using the cash basis for accounting purposes is increasing from 6 April 2017. This change forms part of the Government's initiative for simplifying tax paid by unincorporated businesses and runs alongside the Making Tax Digital project.
Under the cash basis, small businesses are taxed on the basis of the cash that passes through their books, rather than being asked to spend their time doing calculations designed for big businesses. General partnerships may use the cash basis - as long as the partnership meets the receipts and other entry criteria, the partners are all individuals, and either there is no individual treated as controlling the partnership, or any such individual would be eligible to use the cash basis if they were conducting the business as a sole trader.
Amendment to the existing legislation (currently contained in ITTOIA 2005, Part 2, Chapter 3A) takes effect from 6 April 2017 (operative for 2017/18 onwards) and increases the threshold for the cash basis from £83,000 to £150,000. This measure is expected to have a significant impact on businesses. An estimated 135,000 additional small businesses will be eligible to choose the cash basis for their business, with 87,000 estimated to take up that choice.
The exit threshold will continue to be set at double the entry threshold, so it will increase to £300,000 from the same date.