Business

In Which Way bookkeeping works for a sole trader

Unsure what accounting records you need to keep for your small business? Find out more about your bookkeeping responsibilities as a self-employed person, and what information your accountant needs from you. Bookkeeping for Sole Trader is one of the administrative priorities for any self-employed individual. Maintaining accurate records of your income and business expenses is essential as it helps you understand your finances and track progress against any targets or cash needs you may have.

Bookkeeping also helps you to provide your accountant with the information they require to finalise and submit your annual self-assessment tax return.

When it comes to your annual income and expenditure as a sole trader. It is important to retain records of all your invoices and receipts. This makes it faster for your accountant to reconcile your financial records and process your self-assessment to calculate any tax liabilities or refunds. It also helps you deal with any questions HMRC should raise about your tax affairs.

What records do I need to keep as a self-employed person?

Contrary to the rigid reporting and bookkeeping requirements for small businesses however, the rules for self-employed people are more flexible. However, this doesn’t make it less crucial for people to keep track of their financial records. Are you constantly asking yourself “What records do I actually need to keep?”.

We’ve prepared below a short summary of our findings as a guide:

  • All types of income:

    Keep on top of your invoices as well as other documentation supporting any income you earn by your self-employed or business work. In addition to any other personal income (e.g. rental income from an buy-to-let home).

  • All business forms and expenses

    Keep track of all receipts and expenses related to your personal or business work. As they may be deducted from earnings when you calculate your profits on your self-assessment tax returns. It is not necessary to include receipts for these expenses in your tax return. However it is beneficial to have the expense records in digital format to back up any transactions in case you or your accountants HMRC as well as other tax authorities require more details about your finances.

  • VAT record (for those who are VAT registered)

    Businesses that are VAT registered must keep a log of VAT invoices they have issued to their customers as well as all costs in which VAT was paid to them. This will help in the filing of VAT return and submittals.

  • Records of banks

    Any bank transactions that relate to your personal or business actions should be recorded. It is recommended that you have an account with a separate bank so that they can be easily identifiable. Your accountant can assist with this by providing online bookkeeping software that connects to a variety of bank accounts, which makes it easier for recording.

  • All records of grants of the Self-Employment Income Support Scheme (SEISS)

    It is vital to keep in mind that all grants you receive from HMRC throughout the life of SEISS must be recorded. Reported as tax-deductible income to be included in your self-assessment.

How long will you need in order to maintain tax documentation of a company?

It is the UK Government states that businesses must keep their tax records for at most five years following the 31st day of January deadline in the fiscal year concerned. For instance in the self-assessment 202/22 tax return, which has an end date of 31st January 2023. you have to keep these documents until the 31st of January in 2028. If you lose them it is recommended to make notes now in order to provide estimates or interim figures in the future. Be aware that there are other recording requirements for companies with limited liability that are not addressed here.

Do sole traders have to create accounts?

It is not a legal requirement for self-employed sole traders to publish formal accounts. However, advantages to preparing formal accounts. They help owners comprehend how their company is running and also help with bank relationships as well as requests for loans or financing.

What is the most efficient software for accounting sole traders?

If you’re looking for the sole trader software that will improve the accuracy of your bookkeeping. Also help you ensure you are ready to making tax Digital. We strongly recommend the following tax accounting software to start with:

Xero
The Xero software offers an award-winning solution that links well with the personal, expert service delivered by our own accountants. Xero will automatize a variety of the routine accounting tasks such as the sending of reminders for invoices as well as the import of bank transactions to update your accounting records. It’s also easy to join into other Xero products, such as Xero Payroll for seamless bookkeeping.

QuickBooks
This QuickBooks software is designed to eliminate the stress of the process of updating and processing your company’s information. You can access your QuickBooks software from any device and receive live information and reconciliations from every one of your bank accounts. You can also send custom invoices and quotes through mobile devices to enhance your brand’s image and build your reputation.

Do I have to manage the bookkeeping myself?

If you want to keep your overheads low and avoid paying accounting fees. It is possible to look after your own bookkeeping. But there are some the potential risks since you’ll require to be completely precise in recording your income as well as expenditures. Making mistakes in your bookkeeping could be devastating, especially when this leads to an unexpected HMRC probe.

Professional bookkeeping will save time by removing the burden of managing your own books away. Which allows you to concentrate on developing your business and getting the perfect balance of work/life. It can also aid you in understanding your company’s finances, keep track of the cash flow, prepare for tax liabilities in the future and identify trends to make critical business decision-making.

Sherwin Currid Accountants can aid in your bookkeeping

We’ll handle your bookkeeping for you which will save you time and money. So that you can concentrate on the things you enjoy doing best running and expanding your company. Our rates are affordable and we’ll offer you tools to you make life easier.

We have best and certified accountants in Guildford who can manage and handle all your accounts. These intuitive platforms can also help you to make decisions about your business with more foresight.

To schedule a complimentary consultation on our bookkeeping service, which will take the hassle of managing your bookkeeping off your shoulders, contact our team at 0800 135 7157 or drop us an email mail at info@sherwincurrid.com

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