Simple guide to accounting for sole traders
Deborah T: Can you give a simple guide to accounting for sole traders? Perhaps including things like best practice for book keeping, general accounting tips, how/when to submit self-assessment tax returns etc.
Millward May: The first thing you’ll need to do is sign up for self assessment, you can do that using the following link: www.millwardmay.co.uk/sole-trade-sign-up.
You need to keep a list of sales and expenses so that you can calculate your profit figure - you can either use a spreadsheet or a cloud bookkeeping software for this (FreeAgent, Xero, Quickbooks, etc). Here is a list of common expenses that you can claim for: www.millwardmay.co.uk/sole-trade-expenses. Keep receipts for all of the expenses that you are claiming for.
Once the tax year has finished, you can either get an accountant to help you file your tax return or do it yourself. Here is a link I have found that should allow you to do it yourself: www.gov.uk/log-in-file-self-assessment-tax-return. Our knowledge here is slim because we use our own software to submit tax returns for people & so have never used HMRC’s website to do this.
Your self-assessment tax return is due by 31 January following the end of the tax year which ends on 5 April. For example, for the tax year from 6 April 2019 to 5 April 2020 (i.e. 2019/20), the tax return and any tax payable for that period would be due by 31 January 2021.