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Record invoices that span multiple tax years

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Summary

How Sage Sole Trader handles sales invoices when payments fall in a different tax year to the invoice date.

Description

Sage Sole Trader uses cash basis accounting. This means the date you receive or make a payment is what counts for Making Tax Digital (MTD) for Income Tax. Rather than the invoice date. 

You can still record invoices dated in a previous tax year. The invoice date is for your records and to track what customers owe you. The payment date is what determines which tax year the income or expense falls into for your quarterly updates.

Invoices issued in a previous tax year

You can issue an invoice in one tax year and receive the payment in the next.

EXAMPLE:

You invoice a customer in March, and they pay you in May.

When this happens:

  • Record the invoice with its original issue date
  • Record the payment with the date you actually received it
  • The payment counts towards the tax year you received it in, not the year you issued the invoice

TIP:

To see an invoice dated in a previous tax year, change your date range to cover the date you raised the invoice. Otherwise it won't appear in your current view.

Why the payment date matters for MTD for Income Tax

Under MTD, you submit quarterly updates of your income and expenses. Cash basis accounting means each transaction belongs to the quarter, and tax year, in which the money moved.