Are you self-employed and looking to manage the bookkeeping of your business on your own for as long as possible? For any business, no matter how large or small, bookkeeping plays an important role in keeping records of income and expenditure. It is essential for understanding the finances of a business at any time but getting started alone as a sole trader can be a daunting prospect.
At Every Penny Accounts, we offer professional accounting services, and we have worked with a number of sole traders across the UK to help them manage their bookkeeping. If you’re looking for advice, our team has come together to create this helpful article for sole traders who want to understand what bookkeeping means for them.
What is Bookkeeping and Why is it Important?
Whether you’re a sole trader, small business owner, or oversee a larger corporation, bookkeeping is an essential part of the day to day running of your business. At a minimum, bookkeeping should be a weekly task to accurately record the earnings and spendings of your business, with many sole traders opting to monitor their daily income and expenses for record keeping.
While it may seem like a lot of time and effort to spend most days doing it, bookkeeping is a legal requirement and failure to accurately record accounts and transactions may land you with a £3000 fine from HMRC. This has a much bigger impact on a sole trader as they are individuals who do not have the protection of a Limited Liability Company or other corporation.
Bookkeeping is important for more than just keeping in line with UK laws, by having accurate records of the money moving through your business, it allows you to create projections for the future and can lay the groundwork for growing your business.
Key Considerations to Manage Your Account
As a sole trader, unless you turn to outside resources, you and you alone will be responsible for accurate bookkeeping for your business, and while you could take on staff, you will still be classed as self-employed and must:
- Pay income tax on all profits
- Submit an annual Self-Assessment Tax Return
- Have full responsibility for all your business debts
- Register for VAT if your turnover is above the VAT threshold
HMRC will carry out random checks on businesses to ensure compliance and if you do not have records and paperwork that dates back at least six years (or as long as your business has been established) you will be fined.
Records to Keep
Business finances are the main items on the agenda when it comes to bookkeeping, and it’s important to make sure all information is accurately recorded. If you’re a sole trader, you must keep information on all business expenses, all sales and profit, PAYE records if you have any employees, documents on your personal income, any grants you have received, and VAT records.
As we’ve already highlighted one of the major consequences of not accurately bookkeeping, we’re pleased to inform you that bookkeeping can greatly benefit your business too. Accurate bookkeeping means you have proof of all transactions that can be classed as business expenses. You can work out the trajectory of your business from any profits or losses and makes it easier to claim back on tax.
Expenses To Claim as a Sole Trader
One of the biggest benefits of accurate bookkeeping as a sole trader is the ability to offset your expenditure by claiming different expenses, which can decrease your overall tax as long as they are allowable expenses. Some of the costs you can claim include:
Travel Costs: Fuel, fares, and parking.
Clothing Expenses: Uniforms or PPE.
Staff Costs: The cost of sub-contractors or staff.
Financial Costs: Insurance or bank charges.
This is just a small snippet of the many different types of expenses that a sole trader can claim on, and for more information we recommend getting in touch with the team at Every Penny Accounts to chat with a reliable accountant.
Can a Sole Trader Benefit from a Bookkeeping Service?
With so much on the line when it comes to rewards and consequences for bookkeeping as a sole trader, it’s impossible to overlook how much an experienced and professional accountant can help. If you’re a sole trader with the budget to do so, outsourcing your bookkeeping to a team like Every Penny Accounts means accurate bookkeeping every time.
Contact Every Penny Accounts for more information
If you would like to know more, or to enquire about our bookkeeping services in Ripon, Northallerton, Harrogate, and more, reach out to our expert team now. From sole traders to large corporations, we can assist with your bookkeeping requirements.
