WITH the new tax year just around the corner, small businesses are being urged to consider a scheme that allows them to be taxed on money that flows in and out of their business, rather than using full accounting rules.
The ‘cash basis’ scheme can be used by sole traders and other unincorporated businesses with an annual income of less than £79,000 to simplify their accounting processes, saving both time and money.
Using the scheme involves a business simply working out the cash received in a tax year, less any money spent on allowable business expenses. This means small businesses won’t need to spend time at the end of the tax year making complex accounting adjustments, and other calculations designed for larger businesses.
Many small businesses are likely to benefit from the simplicity of the cash basis, particularly those providing services, such as hairdressers, window cleaners, taxi drivers, gardeners, painters and decorators, plumbers and electricians.
In addition, unincorporated businesses can choose to use ‘simplified expenses’. This involves using flat-rates, instead of making complex calculations of actual business expenses. It can be used for the following expenses:
business costs for vehicles;
business use of your home; and
private use of a business premises as a home.