VAT
Cash accounting pays VAT when customers pay you, protecting cash flow and bad debts. Standard accounting follows invoice dates. Which suits your business.
Written and reviewed by Waqas Sagar Member of ICAEW, Fellow of ACCA, Fellow of AAT, a double graduate and entrepreneur at heart, helping startups grow and serving thousands of businesses nationwide with an excellent team. Published by LimitedCompany.Accountants, 12 London Road, Morden, London SM4 5BQ. Reviewed 12 September 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
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Xero Gold PartnerCertified advisor
QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityCash accounting means you account for VAT when money is received and paid, rather than when invoices are issued. It suits businesses that give credit or suffer late payment. Standard accounting suits businesses paid up front or reclaiming large amounts on credit purchases.
Who benefits from cash accounting
When standard accounting is better
Cash accounting means you account for VAT when money is received and paid, rather than when invoices are issued. It suits businesses that give credit or suffer late payment. Standard accounting suits businesses paid up front or reclaiming large amounts on credit purchases.
Any business invoicing on 30 to 60 day terms. Under standard accounting you can pay HMRC VAT on an invoice months before the customer pays you. Cash accounting removes that, and bad debts never carry a VAT cost because the VAT was never due.
You can join if taxable turnover is under £1.35m and must leave once it exceeds £1.6m. There is no application; you simply start at the beginning of a VAT period and keep the records to support it.
If customers pay immediately, as in retail and most e-commerce, cash accounting gives no timing advantage while delaying input VAT recovery on purchases you have not yet paid for.
Businesses making large credit purchases, or regularly in a VAT repayment position, usually recover faster under standard accounting.
Rates, thresholds and deadlines quoted here reflect the 2026/27 UK position and current Companies House and HMRC guidance. Check GOV.UK, or ask us, before relying on them for your own company.
Local help
We work with company directors across London and Surrey from our office at 12 London Road, Morden, London SM4 5BQ. Pick your area, or send the form below and we will call you back.
Frequently asked
Yes, the flat rate scheme has its own cash based turnover method.
Some transactions, including imports and reverse charge purchases, stay outside cash accounting.
No. Annual accounting changes the number of returns, not the timing of when VAT is recognised.
Keep bank statements, sales and platform reports, purchase invoices, payroll records, VAT workings, finance agreements and Companies House correspondence. We confirm the exact list at onboarding and identify gaps before a filing deadline becomes urgent.
The fee depends on transaction volume, record quality, VAT and payroll requirements, historic catch-up and the level of reporting needed. We agree a fixed scope and price before technical work starts, with published packages available on our fees page.
Yes. We request professional clearance, collect the prior records and authorities, check the next Companies House and HMRC deadlines, and give you one clear handover list. The process is normally completed remotely.
Yes. We work through secure cloud records, scheduled reviews and digital approvals, while keeping a named team available by phone, video call and email. Clients can also visit our Morden office by appointment.
We regularly work with Xero, QuickBooks, FreeAgent, Sage and connected sales or expense apps. The right setup depends on transaction volume, integrations and the reports you need, not simply the software brand.
The relevant calendar may include annual accounts, Corporation Tax payment and return dates, confirmation statements, VAT returns, payroll submissions and Self Assessment. We map the dates from your company year end and registrations.
No. This page explains general UK rules and common accounting treatment. Your facts, contracts and wider tax position must be reviewed before you rely on a conclusion.
Included approach
Check the current rules
Deadlines, thresholds and filing rules change. GOV.UK and Companies House publish the current statutory position; advice should then be applied to your company’s circumstances.
Talk to an accountant
Share your next deadline, accounting problem or growth question. We will reply with a clear next step and quote any technical work before it begins.
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Pick a time that suits you and a qualified accountant will call you about your company, deadlines and fees.
Appointments run monday to friday, 9:00am to 5:30pm. Your confirmation is emailed straight away.
