Reporting income and expenses under MTD will be easier for businesses who draw up their accounts using the cash basis. This is a basic form of accounting which suits certain small unincorporated businesses.
Currently, in order to use the cash basis you must be a trading business, not a limited liability partnership or property investor, with turnover not exceeding the VAT registration threshold (£83,000).
You must switch to a traditional accruals basis of accounting once your turnover exceeds twice the VAT threshold (£166,000). The entry and exit thresholds for the cash basis will increase to £150,000, and £300,000 respectively, on 6 April 2017. However, other restrictions remain, including a block on setting losses against the trader’s other income and a £500 cap on the amount of interest which can be deducted per year.
