Maintaining your own financial records and doing your own accounts is essential to self-employment. Here are some things to think about:
Keep self employed records from the start
From the moment that you start your business, make sure that you keep a record of everything. Keep receipts for any purchases and keep records of invoices so that you can accurately record them when you come to complete your tax return.
Make sure that you know some of the key dates for your accounts, tax, VAT, PAYE, etc and when they are due. If you miss deadlines, you could be fined.
Get a bookkeeping system
Set up an easy accounting system from the start. You could even start with a simple spreadsheet to record costs, sales and expenses.
You could also use an accountant to help you and many offer reasonable fees to help complete tax returns. They may also provide you with some means of keeping your own records.
Simplify your accounts
Using accounting software can make the task of tracking your finances faster and simpler, there are a number available including Quick Books and Zoho. Many offer a free trial or free version, so see which one works best.
Claim for all business expenses
Remember to keep all receipts for any purchases that you make for your business – even the smallest costs, such as stamps, stationery, bus and train tickets etc.
Record all your business trips and claim for these – even if it’s just to go to a meeting or to collect a parcel.
If you use your home as an office, you can claim for a proportion of your domestic bills – including lighting, heating, internet and telephone charges. All expenses ultimately offset against your income to ensure you pay a fair amount of tax.
Get bookkeeping advice
HMRC offers many videos and webinars to show you what you need to do. These cover a range of topics and you’ll also be complying exactly with HMRC advice.
HMRC also provides a free payroll solution, which should include everything required for you to keep your own books.
Budget for tax
Make sure that you put money aside to pay your tax bills. Payment on account means that you will need to pay bills twice a year, so make sure there is enough set aside to do this A general rule of thumb is to save 25-30% of your income to cover your tax bill.