Invoice date or when payment received - which to use for tax return

[spewgloriousspew]

Hello,

Still getting my head round being self-employed. I need to fill out my first tax return and am a bit stumped.

A lot of my work is done for an agency that pay 60 days after the invoice is received (rubbish, I know). But this means that a lot of work that I did last tax year still hasn't been paid, and won't be until June, earliest. So, do I declare it on my tax return for 2011/12, or leave it until 2012/13, when it actually will have been paid?

I'm guessing that it needs to be declared at the invoice date, but would appreciate if someone could clarify this for me.

Thanks!

I just do simple cash accounting (is that called receipts and payments accounting?) - I log the invoices on the dates they are paid. I don't know whether it's dodgy to do that over the break of the tax year, but I've always done it that way (been SE since 2003).

Thanks, Bramshott. I do the opposite at the mo (record invoice date not when paid) and it didn't dawn on me that this would bridge the tax year until just now. Not sure if I'm doing it right then.

Any other opinions?

I do it the same as Bramshott too - it makes sense to me otherwise you're potentially paying tax for money you didn't actually receive in that financial year aren't you?

ok, sounds like I need to change my system. Thanks, both!

Unfortunately Bramshott's way is not allowed. You have to use the accruals basis, which means that you pay tax on income that relates to work performed, not cash received.

This has been the case since 1998, although there is some discussion about reintroducing the cash basis for small businesses.

Ah, so I was doing it right. Thank you, MrAnchovy.