How to manage your accounts and bookkeeping as a sole trader Sage Advice United Kingdom

The three main types of financial statements are the income statement (or profit and loss statement), balance sheet, and cash flow statement. Once you have decided on a method for your sole trader record keeping, you can start creating accounts and categories that represent different types of financial transactions in your business. For example, opening separate accounts for sales revenue versus expenses allows you to track where money is coming from and going out. Categorising transactions also helps make tax time easier by allowing you to group expenses that are deductible on your tax return. Bookkeeping allows owners to track their income and expenses, manage cash flow effectively and budget for taxes. Additionally, accurate financial records are necessary for lodging tax returns with the Australian Taxation Office (ATO).

With Making Tax Digital (MTD) rolling out, it’s advisable to get used to a digital system. It’s also much easier to keep all of your records organised when they’re on an accounting software. At public or private limited companies, income sole trader bookkeeping tax is automatically deducted from an employee’s paycheque. This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business.

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Some sole traders even set up two accounts so they can set aside savings for their tax liabilities as and when they fall due. We’re obsessed with giving business owners exactly what they need in order to take control of their bookkeeping. That’s why our accounting software now includes double-entry accounting – an industry standard features that helps you keep all of your debits and credits in check.

You need to keep your records for a minimum of 5 years after the tax return because you may need to show them to HMRC, auditors, banks or lenders. Discover what you need to know about doing the accounting and bookkeeping for your small business. Any extra Class 4 National Insurance payments will be calculated by your accountant at the end of your tax year.

Better tax preparation

In addition to online bookkeeping software, it’s also wise to get your hands on an appointment-booking app to help you keep your calendar up to date once you start working with clients. Digital communication tools, like video call and messaging apps, and virtual meeting software, are also essential for running a successful bookkeeping business from home. Identifying your target customer base from the outset can help you avoid a few headaches down the road!