Every creator has had this month. A brand agrees a £14,000 campaign in February. You film in March, post on the 16th, invoice on the 18th. Their finance team pays 30 days after the end of the month the invoice was received, someone is on holiday, a purchase order number is missing — and the money lands on 12 June.

The tax year ended on 5 April. So which year is that £14,000 taxed in: the one you did the work in, or the one you got paid in?

The answer flipped for almost every self-employed creator in the UK from April 2024, and a lot of people still have it backwards.

Cash basis is now the default

There are two ways to work out your taxable profit.

  • Traditional accruals accounting records income when you earn it and costs when you incur them. The March invoice belongs to the tax year you did the work in, paid or not.
  • Cash basis records income when the money reaches you and costs when you pay them. The March invoice belongs to the year the money arrived.

Until the 2023/24 tax year, accruals was the default and cash basis was an opt-in regime you could only join with turnover under £150,000. From the 2024/25 tax year HMRC reversed it. Cash basis is now the default method of calculating trading profit for sole traders and partnerships without corporate partners. The turnover thresholds for entering and leaving were removed entirely, the £500 cap on deducting interest went, and the old restrictions on how cash-basis losses could be relieved were removed too.

Which means one thing that catches people out: if you want accruals accounting, you now have to opt out, by ticking a box on your Self Assessment return. Do nothing and HMRC treats you as being on cash basis. The first return this applied to was 2024/25, filed by 31 January 2026 — so if you have never consciously made this choice, you have almost certainly already made it. HMRC's own cash basis guidance sets out the rules.

This is a sole trader decision only. Limited companies cannot use cash basis. Company accounts are prepared on the accruals basis, full stop — so if you incorporated, the March invoice is company income in the year you raised it, whenever the brand gets round to paying.

Why cash basis suits creator income

For most creators it is the right default, and not just because it is the one you get by accident.

  • You are never taxed on money you have not been paid. Brand and agency payment terms of 60 or 90 days are normal, and creators are near the bottom of everyone's payment run. Under accruals you can owe tax in January on an invoice that is still unpaid.
  • The bookkeeping is bank-statement shaped. Money in, money out, no debtors ledger. When your income arrives from five platforms on five different schedules, that matters — our post on creator bookkeeping across multiple platforms covers the practical setup.
  • It makes Making Tax Digital far less painful. From April 2026 sole traders with qualifying income over £50,000 keep digital records and file quarterly updates. A quarterly update built from what actually moved through the bank takes minutes; one built from earned-but-unpaid income does not. See what MTD means for creators.
  • Equipment is deducted when you pay for it. Camera, lights, editing machine, microphones — under cash basis these come off as an expense in the period you paid, with no capital allowances computation. The exception is cars, which stay on capital allowances unless you claim the mileage rate instead. The creator expenses guide has the full list.

Worked example: the £14,000 that straddles 5 April

Illustrative figures; every rate and threshold is the real 2026/27 one. A sole trader creator has £41,000 of profit for 2026/27 from AdSense, affiliate income and smaller sponsorships. On top of that sits the £14,000 campaign — invoiced 18 March 2027, paid 12 June 2027.

One brand deal, two possible tax years A timeline showing an invoice raised on 18 March 2027, the 5 April tax year end, and payment received on 12 June 2027. Under accruals the income falls in 2026/27 and the tax is due 31 January 2028. Under cash basis it falls in 2027/28 and the tax is due 31 January 2029. 2026/27 tax year 2027/28 tax year 5 April 2027 18 Mar 2027 Invoice raised 12 Jun 2027 £14,000 lands in the bank Accruals: taxed in 2026/27 Balancing payment due 31 January 2028 Cash basis: taxed in 2027/28 Balancing payment due 31 January 2029
Same campaign, same creator. The only difference is which date the tax system looks at.

On accruals, 2026/27 profit is £55,000. After the £12,570 personal allowance, taxable income is £42,430: £37,700 at 20% is £7,540, and the remaining £4,730 at 40% is £1,892 — income tax of £9,432. Class 4 National Insurance is 6% on the £37,700 between £12,570 and £50,270 (£2,262) plus 2% on the £4,730 above it (£94.60). Total: £11,788.60.

On cash basis, 2026/27 profit is £41,000. Taxable income is £28,430, all inside the basic rate band at 20% — income tax of £5,686. Class 4 is 6% on £28,430, or £1,705.80. Total: £7,391.80. The £14,000 lands in 2027/28 instead.

So the tax on that year falls by £4,396.80 — and the creator stays out of higher rate altogether, because the deal was the only thing pushing them over £50,270.

Then payments on account multiply the difference. Both bills are over £1,000 and neither is taxed at source, so HMRC adds two payments on account of half the liability each. On accruals the bill on 31 January 2028 is £11,788.60 plus a £5,894.30 payment on account — £17,682.90. On cash basis it is £7,391.80 plus £3,695.90 — £11,087.70. A six-week difference in when a brand's finance team pressed the button moves £6,595.20 of January cash. Our payments on account explainer covers that mechanism in full.

Be honest about what this is. Cash basis defers the tax, it does not delete it. The £14,000 is taxed in 2027/28 instead. You only keep a permanent saving if the later year is taxed at a lower rate — which does happen to creators, because income is lumpy, but do not plan on it.

Where cash basis costs creators money

It is the sensible default, not a universal answer. Three situations where accruals is the better choice:

  • You get paid up front. A course creator who takes £30,000 of pre-orders on 20 March for a cohort that runs in May is taxed on the whole £30,000 in the earlier year under cash basis — before any of the work is done, and possibly before the refund window closes. Accruals recognises it when it is earned, which is the year the cohort actually ran.
  • You buy stock in bulk. Under cash basis, a TikTok Shop or merch seller deducts stock when they pay the supplier rather than when it sells. Good for cash flow, but one big pre-Christmas order can make a strong year look weak and the following year look inflated.
  • You need your accounts to mean something to a third party. Mortgage lenders average two or three years of profit. Cash basis figures swing with payment timing, and a lender sees the swing, not the reason for it.

None of this changes the sole trader versus limited company position we take across the site: recent tax changes have made that decision close to a wash at typical creator profits, and incorporating is not an automatic saving. See sole trader vs limited company for creators before you let an accounting method push you into a company.

The trap: cash basis does not mean cash only

This is the part creators get wrong most often. HMRC's cash basis receipts include the value of any payments in kind for work done or goods sold — not just money.

So a £900 handbag sent on the condition that you post about it is a taxable receipt at its value in the period you received it, even though nothing hit your bank. Being on cash basis does not exempt it. Our gifted vs paid brand deals comparison does that maths, and the gifted products and brand deals guide sets out when a gift is taxable and when it genuinely is not.

Two more timing points worth being straight about:

  • Platform balances you can withdraw are yours. Money sitting in a Stripe or PayPal balance you could take out today has been received; moving it to your high street account later is a transfer between two accounts you already control.
  • Money held below a payout threshold has not been received. AdSense earnings stuck under the $100 payout floor, or affiliate commission a network holds until it clears a validation period, are not receipts until they are actually paid over.

Switching between the two

The choice is made each year on your return, so you are not locked in. When you move between the methods, transitional adjustments make sure income is not taxed twice or dropped altogether — the unpaid invoices you carried across have to be caught up somewhere. That is exactly the kind of adjustment worth having an accountant do rather than working out yourself, and it is a reason not to flip between methods every year chasing a timing advantage.

What to do this week

  1. Find out which basis you are on. Open last year's Self Assessment return and look for the traditional accounting opt-out box. Unticked means cash basis.
  2. List what is unpaid right now. Every invoice raised and not yet settled, plus affiliate commission still in a validation window. That total is the amount the two methods disagree about.
  3. Look at your March. If big invoices habitually land in March, the method you are on is quietly deciding several thousand pounds of January cash flow.
  4. Add the non-cash receipts. Gifted products you were obliged to post about, at market value, in the period you received them.
  5. Model the year. Run both profit figures through our free creator tax calculator, and read the creator tax guide for how the rest of it fits together.

Most creators should be on cash basis and should know they are on it, rather than finding out from an accountant three years later. If you are not sure which one you picked — or you take money up front and suspect you picked wrong — talk to us. Fixed monthly fees are on the pricing page.