Bookkeeping – What is it and why do I need to do it?

Basically, bookkeeping is just filing your receipts and creating an index record of those receipts This record is your accounts and is a summary of all your daily transactions in your business.

Bookkeeping – What are accounts for?

Your accounts are the financial story of your business. Anyone who looks at them should be able to see what you buy and sell and understand what your income and expenses are and where they come from.

If you’re not recording everything that you need to, then the story is incomplete. It’s a bit like a murder mystery that your sibling or pet has got hold of and torn some of the pages out so you don’t know who did it. It’s frustrating to those who need to read your business story, such as your accountant if they produce your Financial Statements or HMRC should you be chosen for an audit, as they have to try and fill in the gaps and work out what’s missing.

The better your accounts records are, the easier they are to read and the fewer questions will be asked about your day to day activity. Well documented accounts will also make it easier for you to calculate the figures you need for your tax self-assessment and you’ll spend much less time completing this when the time comes.

When does the tax (financial) year begin/ end?

In the UK, the tax year revolves around 5th April. But what does that mean for you and your bookkeeping? Well, you need to record everything up to and including the 5th April in your self-assessed tax return and then start recording the new year on 6th April.

Expenses – What can I claim?

I am asked this a lot, and while it’s all listed on HMRC, I know even these letters make some people squirm, so instead of redirecting you to their website, here’s a guide to Expenses for Sole Traders that I created for you.

Self-assessment – What is this and when do I have to complete it by?

If you are self-employed, you will need to submit a self-assessed tax return to HMRC in order for them to calculate how much tax and national insurance you need to pay. It’s not a difficult process, but it can take a lot of time to answer all the questions and collate all the information together before you start.

This is done every year, although HMRC is planning to make this more regular under ‘Making Tax Digital’. You don’t need to worry about this right now, but I will keep you informed of any changes in my monthly newsletter.

You have from 6th April to 31st January to submit your self-assessment online (the paper deadline is 31st October). That’s a long time, 9 months in fact, and you don’t have to leave it until January either, you can submit anytime after 6th April. So, if you’ve been updating your books regularly, then you will have all the information you need to get started right away.

The deadline for paying your tax bill is 31st January. Again, you don’t have to leave this to the last minute and it is possible to set up a regular payment to help you plan for this expense in the current financial year.

How long should I keep my receipts?

You need to keep all your receipts and invoices for 6 years plus the current financial year. They don’t need to be in hard copy, HMRC are happy with digital records, so you can save them to your computer. However, you need to ensure that it is easy to find them and match them to your accounts records. Good practice would be to save them with the date of the document at the beginning of the title in the format ‘yyyy-mm-dd document name and reference’, as this will store them in date order.

You will also need to ensure that you have a backup of your files and keep this either in the cloud or if on an external hard drive, in a different room to the computer. That way if something should happen to your computer, the backup is less likely to have the same fate.

As an alternative, you can use any number of receipts apps, which store all the data and a digital copy in the cloud so you can bin your receipts once they are processed by the app. I reviewed a few in my recent newsletters and my favourite is 1 Tap Receipts/ Receipt Bank.

Am I allowed to be a sole trader and have a part-time job at the same time?

The answer to this is simply Yes. When you complete your self-assessment you will also have to fill in the section relating to your part-time (or full time) employment. Your employer will provide you with a P60 at the end of the tax year and this will give you all the relevant information you need to fill in on your tax return. Any tax you have already paid is taken into account to calculate how much you will need to pay on your self-employed earnings.

Working together

Every client is different and as such, we will start with a “getting to know you” call to work out the best way for us to work together.

We will discuss how you are currently recording your financial transactions and which software you are using and then work out what will work best for us both going forwards.

Can you work remotely?

Yes, I will communicate with you by email and video call, as well as face to face.

What do I need to provide in terms of receipts etc?

We will discuss the best ways of working together and software we can use to make sharing information as easy as possible.

What accounting systems do you use?

Currently, I use the Wave accounting software, which is free to use and makes sharing of information and collaboration on your accounts easy to do remotely.

What can I do for you?

I am licensed to:

  • Undertake bookkeeping for sole traders and limited companies, including recording your daily transactions and matching these to your bank statements.
  • Complete and submit the self-assessed tax return for sole traders.

I am not currently licensed to complete VAT returns, however, I can undertake bookkeeping for VAT registered businesses and liaise with an accountant for the VAT returns.

You can view my license here.

What are your timelines for getting stuff submitted?

If you want me to complete your self-assessment and you have accurate and up to date accounts, I will accept work up to 30thNovember.

If you want me to do all the bookkeeping as well, then I’ll need all your records by 31st July.