Key thresholds
Cash basis is now the default for all sole traders (from 6 April 2024). No turnover limit. Opt out on Self Assessment to use traditional accounting.
Common questions
Which method is simpler for a sole trader?
Cash basis is simpler for most sole traders. You record what hits your bank account. Traditional accounting requires invoices and bills to be matched to the period, which takes more bookkeeping.
Does my accounting method affect how I claim my van or tools?
Yes. On cash basis, you claim a van or most equipment as a direct expense in the year you pay for it. On traditional accounting, lasting assets go through capital allowances (though the Annual Investment Allowance usually gives the same result). Cars are the exception: they must go through capital allowances under both methods.
Can I switch between methods?
Yes, but switching triggers adjustment rules that can create a one-off tax charge. Take advice before switching, especially if you have significant unpaid invoices or money owed to you at year-end.
Watch out for
—Cars always go through capital allowances, even on cash basis. They are specifically excluded from the cash basis equipment rule.
—If you have significant stock or work-in-progress at year-end, traditional accounting may give a more accurate picture of your profit.
—Interest deductions are capped at £500 per year under cash basis.
If you are unsure which method suits your business, a short conversation with an accountant at year-end can save more than the fee.
HMRC sources
Last verified: May 2026 · Tax year 2026/27