Business Tax

Cash basis – trading businesses

	2018/19	2017/18
Entry threshold – turnover up to:	£150,000	£150,000
Exit threshold – turnover not more than:	300,000	300,000

Entry threshold is £300,000 for Universal Credit claimants.
Unincorporated trading businesses with annual turnover within the above limits can choose to calculate taxable profits on the ‘cash basis’ – income received and expenditure paid, rather than invoiced or accrued.
Deduction for loan interest is limited to £500 per year.
Losses can only be carried forward.
Certain businesses are not permitted to use the cash basis, including: farmers using the herd basis, persons using profit averaging, and LLPs.
Unincorporated property businesses can use the cash basis from 6 April 2017. The key differences to the rules for trading businesses are:

the entry and exit thresholds are both £150,000;
cash basis is the default position for such businesses, but they can elect to use accrual accounting;
there is no £500 restriction on interest costs

Item used for business		Permitted deduction
Taxpayer’s car or goods vehicle	Up to 10,000 miles pa	45p/mile
	Over 10,000 miles pa	25p/mile
Taxpayer’s home (use per month)	25 – 50 hours	£10/month
	51 – 100 hours	£18/month
	101 hours or more	£26/month
Business premises partly used as home (e.g. public house or B&B)		Private use adjustment
	1 occupant	£350/month
	2 occupants	£500/month
	3 occupants	£650/month

Unincorporated businesses can choose the above fixed rate deductions to use instead of calculating the business proportion of actual expenditure.
Use of home deduction covers power, internet, telephone, but not council tax or mortgage interest.
Use of vehicle does not cover finance element of lease or hire purchase costs for vehicle.
Use of business premises amounts are deducted from the actual expenses of running the building so that the personal costs of resident business owners are excluded.