Self Assessment Tax Return Question

[AWP]

Hello,

Please could anyone help me with the below,

For completing a Self Assessment Tax Return, Does the period of time include any income accrued, or only income physically received/paid within that period.

For example I became Self-Employed in February of this year, I have accrued earnings between February and 5th April 2025, however I will not physically receive any payments until after 5th April 2025,

Would this go on my 24/25 Tax Return based on accrued earnings, or should it be carried over to 25/26 once the money is physically received into my account?

Thank you for your help.

 

[Daybooks]

It will depend upon whether you produce your accounts on the ‘cash basis’ or the ‘accruals basis’. See here for eligibility:

Cash basis

Small businesses can record income and expenses when money is actually paid rather than when they've invoiced or received

www.gov.uk

Which ever method you choose and you are currently entitled to change from year to year if eligible, remember you can only be taxed once on the income and can only have the expenditure relieved once.

There are benefits of both so plan wisely.

 

[DWS]

Hello,

Please could anyone help me with the below,

For completing a Self Assessment Tax Return, Does the period of time include any income accrued, or only income physically received/paid within that period.

For example I became Self-Employed in February of this year, I have accrued earnings between February and 5th April 2025, however I will not physically receive any payments until after 5th April 2025,

Would this go on my 24/25 Tax Return based on accrued earnings, or should it be carried over to 25/26 once the money is physically received into my account?

Thank you for your help.

That would depend on which method you use to prepare your accounts, you can use the cash basis or accrual.
If you have not earn’t much during 24/25 then include in this years, best way is to run the figures if you have a rough idea how much you will earn in 25/26 and use whichever method is most beneficial to you.

 

[David Griffiths]

The linked information on the cash basis makes it clear that it is the default basis for accounts preparation for the tax year 24-25 and subequently so there is no question of being "eligible" to use it. In fact you have to actively opt out. Any previous restrictions on claiming deductions for things like bank interest have been removed, as has any turnover limit.

 

[Lisa Thomas]

Hello,

Please could anyone help me with the below,

For completing a Self Assessment Tax Return, Does the period of time include any income accrued, or only income physically received/paid within that period.

For example I became Self-Employed in February of this year, I have accrued earnings between February and 5th April 2025, however I will not physically receive any payments until after 5th April 2025,

Would this go on my 24/25 Tax Return based on accrued earnings, or should it be carried over to 25/26 once the money is physically received into my account?

Thank you for your help.

Recommend you use an accountant to deal with your returns. DM me if you can't find one on here and want a recommendation.

 

[MyAccountantOnline]

This is the updated information on the HMRC website which is now relevant (which David mentioned in his reply)

Cash basis

Small businesses can record income and expenses when money is actually paid rather than when they've invoiced or received

www.gov.uk

 

[Paul Kelly ICHYB]

As you are self employed, if you are not going to use an accountant, keep it as simple as possible, therefore, cash basis i.e. when you receive (or pay) money.

Using an accountant may help you to utilise allowances and save you money, however, if you do not want to pay for the advice, keep it simple.

 

[AWP]

Hi Everyone,

Thank you for your advice and responses, Just for additional context – I am Self-employed as a Sole Trader, working as a contractor on a Consultancy basis, I only have one long term client and my income/turnover is purely from the consultancy services, I also have very minimum outgoings and expenses other than Travel & small business expenses, however my incomings and outgoings are very simple as I only started in February this year and there isn’t really much to report for the 24/25 financial year other than February and March income and expenses which makes me feel it isn't worth using an accountant on this occasion.

 

[DWS]

Hi Everyone,

Thank you for your advice and responses, Just for additional context – I am Self-employed as a Sole Trader, working as a contractor on a Consultancy basis, I only have one long term client and my income/turnover is purely from the consultancy services, I also have very minimum outgoings and expenses other than Travel & small business expenses, however my incomings and outgoings are very simple as I only started in February this year and there isn’t really much to report for the 24/25 financial year other than February and March income and expenses which makes me feel it isn't worth using an accountant on this occasion.

Did you not have any other taxable income for the 2024/2025 tax year?
As this may determine which is the best accounting method to use.

 

[AWP]

Did you not have any other taxable income for the 2024/2025 tax year?
As this may determine which is the best accounting method to use.

Yes, but this was as an PAYE employee and I have already paid tax on it through payroll, so assumed this was irrelevant to my self assessment?

 

[DWS]

Yes, but this was as an PAYE employee and I have already paid tax on it through payroll, so assumed this was irrelevant to my self assessment?

It will still need to be included on your tax return, as I said it may make a difference whether you use accrual or cash basis for you SE work.

 

[AWP]

It will still need to be included on your tax return, as I said it may make a difference whether you use accrual or cash basis for you SE work.

Does it still need to be included even though it's already been processed and tax paid etc, I didn't realise this?

 

[DWS]

Does it still need to be included even though it's already been processed and tax paid etc, I didn't realise this?

Yes, otherwise how will HMRC know at what rate to tax your SE income

 

[Newchodge]

Yes, but this was as an PAYE employee and I have already paid tax on it through payroll, so assumed this was irrelevant to my self assessment?

It MUST be included in your self assessment.

 

[Newchodge]

Does it still need to be included even though it's already been processed and tax paid etc, I didn't realise this?

Perhaps that is one of the reasons you really ought to have a chat with an accountant.

 

[outbooksuk]

Hi,

This is a really common question when you first go self-employed, so don’t worry

The answer depends on which accounting method you’re using cash basis or accruals (traditional) basis.

For most small sole traders in the UK, the cash basis is now the default (unless you’ve chosen not to use it).

If you’re using the cash basis

You only declare income when you actually receive the money.

So in your example:

You started in February.

You earned (invoiced) money before 5 April 2025.

But you won’t actually receive the payment until after 5 April 2025.

Under the cash basis, that income would go on your 2025/26 tax return, because that’s when the money hits your bank account.

If you’re using the accruals basis

Income is recorded when it’s earned/invoiced, not when it’s paid.

In that case, the income earned between February and 5 April 2025 would go on your 2024/25 tax return, even though the payment arrives later.

Most new sole traders filing with HM Revenue & Customs are on the cash basis unless they’ve opted out, so in many cases it’s based on when the money is actually received.

If you’re unsure which method you’re using, it’s worth checking before you submit your return, as it does affect the timing of the tax.

Hope that makes it a bit clearer

 

[DontAsk]

I think it was clear almost a year ago.

 

[Lisa Thomas]

Yes, a year old - maybe time to close it off @Ozzy