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Traditional accounting (also known as “accrual basis” accounting) is a kind of accounting that calculates your profits based on when you send invoices or when you receive them – regardless of whether you actually received or spent the money.
The kind of accounting that looks at when you spent or received money (not invoices) is called cash basis accounting instead. It’s much more straightforward, and almost all sole traders use it.
When do you use traditional accounting if you’re a sole trader:
- When you register as self-employed, you need to choose either cash basis or traditional accounting. You’ll usually choose the cash basis, as it’s the easiest to use
- You can only use the cash basis accounting if you earn under £150,000 (used to be £83,000)
- Once you earn over £300,000 from self-employment, you must switch to the traditional method
Frequently Asked Questions
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Can you help me to maintain my own accounting records?
Of course! We advise that you start a comprehensive spreadsheet to keep track of your taxable income and relevant expenses throughout the year in order to make your tax return more straightforward. This can be done on an Excel spreadsheet or Google sheet to keep things simple! Contact our team for more advice today!
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How easy is it to change or appoint my accountant?
We know that you have plenty to consider when you run a business, so we keep things easy for you. If you are interested in learning more about our services, simply leave us a message via our online contact form and a member of our accounting team will contact you to explain everything you need to know.
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