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B2.111 Cash basis for unincorporated businesses from 2024/25

From the tax year 2024/25 onwards, the default basis for calculating the profit or losses for unincorporated trading businesses, including professions and vocations, is the cash basis. This applies unless the trade is an excluded trade or an election is made to use generally accepted accounting practice (GAAP, see B2.102)¹. The thresholds for eligibility to use the cash basis and restrictions on turnover, interest and loss relief which applied prior to 2024/25 (see B2.112) are removed². Therefore trades using the cash basis can claim a deduction for interest incurred wholly and exclusively for the purposes of the trade, without limit as they can if they were preparing accounts under GAAP (see B2.437).

Under the cash basis rules before 2024/25 loss relief against general income or against capital gains was not available where profits were calculated under the cash basis³(see B8.202). Following the removal of these restrictions from 2024/25 these loss reliefs are now available for trades using the cash basis.

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