If you’re unsure about which accounts you need to keep as a self-employed person, don’t worry. We explain which records you need and how to keep them.
What accounting records do I need to keep?
When you’re self-employed, you’re required to keep information on your business income and expenses for HMRC. You also need to have records of your personal income. If you’re a limited company, you need to keep different records.
How to keep your self-employed accounts
Before you start keeping your accounts, you’ll need to choose an accounting method. There are two different accounting methods you can choose from.
Accrual (invoice) accounting means that both revenue and expenses are recorded before the money is paid, for example when the invoice is sent or received.
Cash accounting means you only record the invoice or supplier invoice on the day when the payment is actually made. This method is only available to sole traders with a turnover of under £150,000.
There are pros and cons to both methods, and you can choose whichever suits your business best.
Record your transactions regularly
The first step to keeping your self-employed accounts is recording your transactions. Regularly recording transactions means your accounts will always be up to date. The easiest way to record transactions is by using online accounting software with a bank feeds feature.
Bank feeds connect your bank account to your accounting software so all your transactions are automatically imported. All you need to do is record them. Features like recording multiple transactions at once and automatically matching similar transactions saves you even more time. Bank feeds mean you’re less likely to forget transactions and miss something important.
Choose the right account
When you keep accounts you are recording your transactions using the chart of accounts. The chart of accounts is a list of the accounts used in bookkeeping. Each transaction needs to be recorded in the right account depending on what type it is.
Send and record invoices
You don’t just need to record transactions but invoices too. When you send your invoices make sure to record both the invoice and the payments in your accounting. If you use the accrual accounting method make sure to remember to record your invoice when you send it.
Don’t forget supplier invoices
If you’re using the accrual method, you’ll also need to record supplier invoices when you receive them.