What happens to my tax if a customer does not pay me?

What happens to my tax if a customer does not pay me? On the cash basis, the default for sole traders since 2024-25, a customer who never pays you costs you no tax: unpaid invoices are never counted as income. Traditional accounting and VAT have their own rules. Not if you use the cash basis, which is the default for sole traders from 2024-25. You only record income you actually receive, so an unpaid invoice never reaches your profit. If you use traditional accounting, the invoice is in your turnover, and you can claim it back as a bad debt once you are sure you will not be paid. No, and you do not need to. GOV.UK says bad debts cannot be claimed under the cash basis because you have not received the money, and the unpaid amount was never counted as income in the first place. No. Under traditional accounting a deduction is only allowed for debts that are bad, or estimated to be bad, one by one. GOV.UK gives the example that you cannot just estimate your bad debts at 5% of turnover. Read the full answer, with every source, at rightotax.co.uk.