Freelancers, sole traders and other self-employed people whose business income is under £79,000 should consider the ‘cash basis’ scheme if they want to save time and money.
Issuing this recommendation, HM Revenue & Customs pointed out that the optional scheme is specifically designed to simplify the obligations of such unincorporated businesses.
Under the scheme, traders under the £79k threshold can be taxed only on the money that flows in and out of their business, instead of having to abide by full accounting rules.
As a result, the owner of the business simply has to work out the cash received in a tax year, minus any money spent on allowable business expenses, HMRC said.
It added: “[So] 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.”
In addition, unincorporated businesses can choose to use ‘simplified expenses,’ which involves using flat-rates, instead of making complex calculations of actual business expenses.
This scheme, which is also not open to limited companies, can be used for business costs for vehicles; business use of home, and private use of a business premises as a home.
“The cash basis and simplified expenses schemes can help save small businesses time and money,” reflected HMRC’s Carol Lunney.
“With a new tax year on the horizon, now is the time to start thinking about them. So, if you’re eligible, go online and find out more”.