Expenditure which is not deemed exclusively for business use would not be tax-deductible, such as training courses not related to the job or business, school fees and gym membership. VAT The real downside is the five client limit on the Lite plan. FreshBooks advises that this refers to “the number of both active and archived clients in your account”. However, “if you’re no longer billing or working with a client, you can delete them to free up spots for new clients”, and retain access to their invoices and information. You are also able to delete and undelete clients as you wish. Firstly, you’ll need to register with HMRC and make sure you understand its rules onrunningand naming your business. Under cash basis accounting, the income is recorded per the date received, which comes under the 2023/4 tax year.

This will include costs like rent and bills for office space, or a portion of your household expenses if you work from home. Under traditional accounting, income and expenditure is recorded by the date invoices are issued or received. In the UK, the financial year runs from April 6th through to April 5th of the following year; referred to as the ‘tax year’.Choosing the right self-employed accounting software for your business is just like choosing anything else – you need to work out what you need most, and what you can live without.

Top tip:Sometimes self-employed people have a mix of permanent employment and freelance work on the go. For example, someone who works in a bank during the week but writes children’s books in the evening or has a side business making jewellery. Using your personal account will warrant additional work and caution, as you must be able to identify and evidence which transactions were personal, and which were business related. Keep in mind that most business accounts come with a monthly fee and that account benefits vary quite dramatically from one product to another, so it pays to do your research and shop around. Adopt an accounting system – however basic! Bookkeepers also have more experience and knowledge when it comes to bookkeeping software and best practices. As a result, they can help businesses to avoid common mistakes and maintain accurate financial records.

Budget for tax

A sole trader is not legally separate from their business, so a separate business bank account is not a legal requirement. However, there are definite advantages to keeping your business and personal finances separate. Optimise Media Limited (FRN 313408) for the introduction of the First Direct Current Account, LV= Pet Insurance and LV= Asda Breakdown. Optimise Media Limited are authorised and regulated by the Financial Conduct Authority to provide credit brokering and general insurance activity. Optimise Media is registered in England and Wales to Exchange Street Buildings, 35-37 Exchange Street, Norwich, England, NR2 1DP and company number 04455319 Pricing: Pricing refers to the cost associated with using the accounting software. It includes factors such as licensing fees and subscription plans. When you register as a sole trader with HMRC, you will be automatically enrolled to complete the Self Assessment Tax Return each year. It's important to register on time to avoid penalties.

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, even a percentage of your rent or proportion of your mortgage interest (although this can lead to you having to pay Capital Gains Tax if you sell your property). You will also need to keep records relating to your self-assessment tax return. The rules require you to keep these records for at least 22 months after the end of the tax year the tax return is for, or if filed late, at least 15 months after you sent the tax return. Grants & schemes If you're self-employed you'll be charged tax based on the amount of profit you've made in a tax year, but there are a number of expenses you can claim that will lower your tax bill. While it's not a legal requirement for a sole trader to have a separate business bank account, there are significant advantages to keeping your business and personal finances separate.

If you charge for your time, like a designer or business coach, registering for VAT voluntarily won’t bring you so many financial advantages. Learn more about how to fill out a Self Assessment for the first time with our handy one-stop guide.

Embarking on the journey of working for yourself as a sole trader? If you are, it’s important to know that managing your accounts and bookkeeping is essential. Get started with flexible, HMRC-recognised Sage Accounting software you can access from anywhere. Explore Sage Accounting FAQs on managing your accounts as a sole trader Do sole traders need bookkeeping software? Our free cashbook template makes it easy to post your business income and expenses monthly, and you can use our guide to claim all the business expenses you are entitled to. Related Articles From April 2026, the government will introduce Making Tax Digital for Income Tax Self Assessment, where accounting must be done using cloud-based software.Online accounting systems are becoming more and more popular with small business as they offer extra features such as invoice creation and automatic feeds from your bank account. These features cut out duplication so save valuable time. You can claim business expenses on your tax return as a self-employed individual. It can help keep your tax bill low, and it’s essential to know what you can claim in tax allowable expenses. Do you provide the main items of equipment you need to do your job, not just the small tools that many employees provide for themselves? In general, sole trader self-employed accounts are far easier to manage than limited company accounts. While accounting covers the more general process of managing your accounts and can involve strategic planning, sole trader bookkeeping goes into the details.