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From the tax year 2024/25 the cash basis is the default method of calculating profits or losses for unincorporated, trading businesses unless the trade is excluded or an election to use GAAP is made by the person carrying on the trade. The thresholds for using the cash basis are removed as are restrictions on interest (see B2.437) and the use of losses (see B8.202). For more details on the cash basis for 2024/25 onwards see B2.111. The rules below therefore apply to tax years before 2024/25.

Up to 2023/24, a person who was or had been carrying on a trade could elect for the profits to be calculated using the cash basis of accounting, rather than in accordance with generally accepted accounting practice, provided certain criteria were satisfied¹. The cash basis applied to professions and vocations as it did to trades, but was not available to companies². A person could make the election for a tax year if conditions A to C below were met³: