Bookkeeping
Cash basis bookkeeping
Cash basis bookkeeping for UK sole traders and landlords: income recorded when it is received and expenses when they are paid, matching HM Revenue and Customs' own cash basis scheme for self-employment and property income. Books stay simple and close to your bank balance, ready for Self Assessment or Making Tax Digital for Income Tax.
Bank reconciliation summary
Illustrative client · August 2026
GBP
| Account | Difference | Status | ||
|---|---|---|---|---|
| Operating account··4821 | 184,220.16 | 184,220.16 | 0.00 | Reconciled |
| Reserve account··0937 | 60,000.00 | 60,000.00 | 0.00 | Reconciled |
| Company card··1006 | (12,418.52) | (12,418.52) | 0.00 | Reconciled |
| Card processor clearing | 8,905.40 | 8,905.40 | 0.00 | Reconciled |
| Payroll clearing | 0.00 | 0.00 | 0.00 | Reconciled |
Last weekly runFri 28 Aug, every account agreed to its statement.
Two open itemsTwo card receipts requested from you, marked on the card account until they arrive.
Illustrative. An example of the document, not a client's figures.
What the cash basis actually is
HMRC's cash basis is a specific scheme for sole traders and landlords: income counts when the money is received, and expenses count when they are paid out, rather than when they are earned or incurred. Most sole traders and unincorporated landlords can elect into it for their Self Assessment return.
Who it suits, and who it does not
Cash basis works well for straightforward trades with no significant stock or long payment terms. A business carrying inventory, offering credit terms, or growing past the cash basis entry limit usually gets a truer picture from the accrual basis instead; we flag that during onboarding rather than defaulting everyone into cash basis by habit.
Making Tax Digital for Income Tax
The cash or accrual choice sits underneath Making Tax Digital for Income Tax Self Assessment, which became mandatory from 6 April 2026 for sole traders and landlords with qualifying income above £50,000, extending to income above £30,000 from April 2027. Either way, HMRC now expects digital records kept through the year, not reconstructed each January.
What you get each month
Bank and card accounts reconciled, income and expenses coded consistently with the cash basis rules, and a simple profit and loss statement your Self Assessment preparer or accountant can read at a glance, whether that is us handing figures to your existing adviser or a preparer we can introduce.
Moving to accrual later
If a mortgage lender, a new limited company structure, or simple growth calls for it, we convert cash-basis history to accrual basis bookkeeping without losing the comparability of prior periods. Get in touch through contact if you are not sure which basis fits your situation yet.
Property income specifically
Landlords with more than one let property often mix personal and rental transactions across the same bank account; we separate rental income and allowable expenses property by property, so the cash basis figures reconcile cleanly to what each property actually brought in and cost during the year.
Questions
Frequently asked questions: Cash basis bookkeeping
Can any UK business use the cash basis?
It is aimed at sole traders and unincorporated landlords; limited companies use accrual accounting under FRS 102 or FRS 105 instead.
Does the cash basis affect when I have to join Making Tax Digital?
No. MTD for Income Tax is based on your qualifying income, not on whether you use cash or accrual basis.
Who actually files my Self Assessment return?
We keep the books; the return itself is filed by you or by a UK tax adviser you appoint.
How does cash-basis bookkeeping affect our VAT return?
VAT has its own cash accounting scheme, separate from the income tax cash basis, and the two can be combined if you are eligible for both. We confirm which scheme applies to your VAT return regardless of which basis your income tax figures are prepared on.
What records do you still need even on the cash basis?
Bank statements, sales records and expense receipts are still required, since cash basis changes when income and expenses are recognised, not whether records need keeping at all. A common misunderstanding is that cash basis means lighter record-keeping, when it mainly simplifies the timing rules.
Is cash basis allowed for my business?
Most small businesses can choose cash basis. Certain entities with inventory or above a revenue threshold may need to use accrual instead; we flag that during onboarding.
Can I switch to accrual later?
Yes. We convert existing cash-basis books to accrual when a lender, investor or your own growth calls for it.
How is cash basis bookkeeping priced?
Pricing for cash basis bookkeeping depends on your transaction volume, the software you use, and how much cleanup is needed before ongoing work starts. Current ranges are published on the pricing page, and your exact fee is confirmed in writing before anything begins.
What software works with cash basis bookkeeping?
Cash basis bookkeeping runs inside QuickBooks Online or Xero, whichever you already use. If you are not yet set up in either, we can configure a file in your name so you keep ownership of it once the engagement is under way.
Related services
- BookkeepingMonthly bookkeepingOngoing monthly bookkeeping: transactions sorted into categories, accounts reconciled and month-end reports delivered in the software you already use.
- BookkeepingAccrual basis bookkeepingBooks kept on an accrual basis, matching income and expenses to the period they were earned or incurred, so reports reflect the real state of the business.
Industries
- Professional servicesBookkeeping for professional service firms such as engineering, architecture and IT consulting billing clients by project or retainer.
- Agencies and consultanciesBookkeeping for marketing agencies, design studios and consulting firms billing clients on retainers and project fees.
- HospitalityBookkeeping for hotels, short-term rentals and hospitality operators reconciling booking platform payouts and occupancy-driven revenue.
Next step
Talk to the team that would run your books
A short call covers your setup, your software and what a first month would look like. You get a written scope and price after it.