Introduction of cash accounting for property rental businesses

15th August 2017

As part of introducing Making Tax Digital (MTD) there were proposed amendments to the way that unincorporated property rental businesses account for their income and expenditure. These proposals will make cash basis accounting the default option for smaller unincorporated property businesses unless they elect to use the accruals basis. Smaller is likely to be defined as total income of less than £150,000.

The cash basis means the business accounts for income and expenses when the income is received and expenses are paid. The accruals basis means accounting for income over the period to which it relates and accounting for expenses in the period in which the liability is incurred. It will still be possible for property businesses to elect to use accruals accounting.

These changes were in the original Finance Bill published before the General Election and will be republished in a Finance Bill to be issued this autumn. These changes will start for income and expenditure transactions from 6 April 2017 although a decision as to whether to use the new cash basis or maintain the existing accruals basis does not have to be made until the 2017/18 tax return is submitted.

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