I am newly on my feet, when do I pay have to tax on my aged debts?

I am newly on my feet; when do I have to pay tax on my aged debts?

If your annual income (net of VAT) does not exceed £83,000 (the current VAT threshold), you may elect to prepare your accounts on the cash basis. Under the new cash basis rules, only income received and expenses actually paid are taken in to account (aged debts are not taxed).

If you are eligible to use the new cash basis, you can continue to prepare your accounts in the same way until your annual income exceeds £166,000 (two times the VAT threshold). If your annual income exceeds this limit, you will be required to prepare your accounts on the ‘earnings’ basis. Under the earnings basis, a proportion of your aged debts are taken in to account for tax purposes.

Depending upon your income, it is possible that you will be required to pay tax on your aged debtors in your very first year. Conversely, you may never have to pay tax on your aged debtors at all!

You should contact a specialist Bar accountant who will be able to advise you accordingly.

This answer was last checked May 2017. This answer is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this answer without taking individual advice based on the full facts of your case. The information given was correct at the time of release.