The cash basis and the accruals basis

Your trading profit basis decides when income and costs count for tax.

• Cash basis - income counts when you are paid, costs when you pay them. This has been the default for sole traders and partnerships since 2024/25.
• Traditional (accruals) basis - income counts when you invoice it, costs when you incur them, and closing stock is valued and carried into the next year.

Set it under Settings, then Self Assessment Settings.

Two cash bases, and they are not the same thing

Kontala has two settings with "cash" in them, and they are independent:

You can be on one and not the other. Changing one does not change the other.

Your bookkeeping does not change

Kontala keeps your books on the accruals basis whatever you choose. Invoices, bills and credit notes all work exactly as before, and your Balance Sheet still shows trade debtors and trade creditors.

The cash basis is applied as an adjustment to the tax computation, not as a different way of recording documents. That is deliberate: restating the Profit & Loss itself would stop it agreeing with the Balance Sheet, and nobody could see why.

Where to see the effect

• Computation tab, under Income Tax - the cash basis adjustment appears as its own line between your accounting profit and your taxable profit.
• Cash Basis P&L report - the same restatement account by account, with Accrual, Adjustment and Cash columns side by side.

What the cash basis switches off

Inventory tracking. On the cash basis, stock is deducted when you pay for it, so there is no closing valuation to carry. Your catalogue still pre-fills invoice and bill lines; only quantity and value tracking is unavailable.

Capital spending on the cash basis

On the cash basis most capital spending is deducted when you pay for it, rather than through capital allowances - but cars are the exception and keep their capital allowances.

Kontala therefore asks, for each asset, whether it is a car. Until you answer, neither treatment can be given and the tax year cannot be closed. Answer it on the asset's own page under Reports, then Capital Assets - see Capital assets.

The Cash Basis P&L also shows a capital deduction worked out on this basis. That figure is not used in the Self Assessment computation, which still claims allowances, and the report says so - do not transcribe it onto a return.

Related

• Self Assessment settings
• Cash Basis Profit & Loss
• Capital assets