No matter the size or type of business that you are running, one aspect is certain, you are going to need to think about your books and how to keep on top of them. You may think that the smaller your business, the easier it is to manage your books, this is not always the case.
Running your small business as a sole trader, you need to maintain good financial records. This is for tax purposes and also for you to review your business progress.
Are you not clear where to start as a sole trader? Here are some of the main things that you need to know about sole traders and bookkeeping.
What records do I need to keep?
The records you need to keep as a sole trader are straightforward. That said, these records are still vital, and you need to make sure that they reflect your business.
Some of the key records that you need are:
- Your income: this includes your invoices and any supporting documents that relate to your income. This should have not only self-employed work but also lettings income and buy to let properties too.
- Your expenses: you should also keep all your expenses and receipts that relate to your business. You do not need to have these as a part of your tax return, but it is a good habit to have them as a record.
- VAT records: if you are VAT registered, then you should keep a record of your VAT invoices and any charges that you have made to your customers with regards to VAT
- Bank records: you should really have a separate business bank account This will make keeping a log of your transactions easier.
How long do I need to keep them?
You need to keep your tax records for at least five years after the 31st January submission date. For example, for the 2021/22 self-assessment tax return, with a final submission deadline of 31st January 2023, you must retain these records until 31st January 2028.
Can I do it myself?
When you run a small business, you will want to keep an eye on all the outgoings that you have. After all, you are going to want to make the most of the money that you have. This means that you are likely to consider whether you are able to DIY bookkeeping.
Of course, you can do this, but it is not always recommended. Not only are you not an expert in tax and everything that you need to do, which can lead to mistakes. But you may also lack time to give this the proper focus. This means that you may find it a struggle. You may neglect tasks that add value to your business.
Do you want to know more about managing your finances and ensuring that your small business is working at peak level? If this is this case, please get in touch with us. As Southside Accountants in Wimbledon, we are best placed to advise you on managing the bookkeeping for your business and ensuring that you make the most of your money.