A Guide to Self-Employed Bookkeeping

Are you a self-employed business owner who wants to complete your own bookkeeping? Your financial data must be correct since you’ll be required to submit a self-assessment tax return with HMRC each year. If you don’t keep up with your accounts regularly, you may need to request a bookkeeper or accountant’s services.

Self-employed bookkeeping

However, if you have confidence, it is possible to complete your return yourself. In this blog post, we’ll discuss the basics of self-employed bookkeeping and how you can go about achieving it yourself.

Business Accounting Basics has free bookkeeping templates to assist in the process. One template that we have received requests for is a cash book that runs from April for the taxation year. There is a free download of the self-employed cashbook template below.

Excel templates are an excellent way for self-employed individuals to keep track of their finances. However, we recommend using accounting software like FreshBooks or QuickBooks to manage your finances, as they offer more features and benefits than Excel templates.

At the end of this post, there are a few frequently asked questions.

Separate Bank Account

When you are self-employed, it is important to have a separate business bank account for your business. It will help you keep track of your expenses and profits, making it easier to file your taxes.

A separate bank account for your business will also make it easier to get a loan or line of credit if you need one. It is not necessary to have a separate business bank account, but it is considerably easier to keep track of your finances if you do.


How to Complete Accounts for Self-Employed

One of the most critical things in bookkeeping is getting organised. You will need to keep all your financial records either paper-based or electronic. It will help you to stay on top of your finances and ensure that your accounts are accurate.

If you want to make sure your bookkeeping is accurate and up-to-date, accounting software packages can upload receipts directly to the software. This way, all of your documents are in one place, and you can easily keep track of your spending.

There are several great bookkeeping packages out there that offer free trials, so take some time to research which one would be the best fit for you. Try out a few different options and see which makes the process the easiest for you.

Self-Employed Business Expenses

You can claim business expenses on your tax return as a self-employed individual. It can help to keep your tax bill low, and it’s essential to be aware of what you can claim.

Some of the most common business expenses include:

  • Business insurance
  • Equipment and tools used in your work
  • Vehicle expenses
  • Travel expenses
  • Office supplies and stationery
  • Professional fees and subscriptions
  • Advertising and marketing costs

It’s essential to keep track of all your business expenses throughout the year, as this will make it easier to file your tax return. You can use a bookkeeping package to help you stay organised, or you can keep all your receipts in a folder or electronic document.


Self Employed Accounting Software

Quickbooks review dashboard

When you’re self-employed, it’s important to keep track of your finances. It might be tough to handle on your own, which is why accounting software may be helpful. Accounting software can help you keep track of your income and expenses, as well as your assets and liabilities. It can also help you prepare tax returns and invoices.

Some of the providers offer a plan for self-employed accounting software. It can prepare all the figures for the self-assessment tax return and track mileage and time. One of the best choices is QuickBooks.

As software develops, it is easier for businesses to complete their accounts. Some of the most popular packages include QuickBooks FreshBooks, Xero and Crunch; these all have a monthly cost. A free package is Pandle, which is easy to use. If you are looking at software, take out a free trial and see if the package is suitable for your business.

We have reviewed some of the best accounting software for self-employed and how to choose the best package.


Advantages of Using Accounting Software for a Sole Trader

There are several advantages of using accounting software for a sole trader. One of the key advantages is that it helps simplify your tax returns as everything is in one place.

Some accounting software features include invoicing, sending out invoice reminders, tracking expenses, bank transactions, cash flow, and tracking income. Overall, these features can help manage a business’s finances.

Excel Spreadsheets

Excel spreadsheets or an equivariant free spreadsheet package gives you the flexibility to design your spreadsheets and get the information you need.

There are lots of free templates available online. Business Accounting Basics has developed lots of templates: including profit and loss, balance sheetcash bookexpenses, creditors, debtors, budgeting and invoice. All our templates are available to download for free and without signing up.

Our cash book for self-employed is available below, along with an example.

Paper Based

If you are a small business and do not like technology, you can complete your records using a paper-based system. Stationery shops and places like Amazon sell books and paper with columns set to record income and expenditure.

The government has long-term plans called “making tax digital”; this will mean that future tax returns will need to be submitted using approved software. When choosing the best way to complete the business bookkeeping, it is one thing to consider.

Self-Employed Bookkeeping Example

Our self-employed bookkeeping example is for a computer repair specialist using our free cashbook template. He buys computer parts and sells his services to repair computers. He rents small premises and pays for utilities.

All the sales are cash, and he issues a Word invoice as a receipt. Record the transaction in the cash book template once the sale appears on his bank statement. Payment of outgoings is either by debit card or Direct Debit and is easy to track. A few business expenses are also claimed using an expense claim form and paid by bank transfer.

Our free guide is available if you are not sure what business expenses you can claim.

Below is a one-month income and expenditure during April.

Self employed bookkeeping

The totals page of the template shows all the figures for April and the end bank balance. You should always ensure that the bank balance equals the figure in the bank. If there is a difference, you will need to complete bank reconciliation.

Self employed bookkeeping template totals

The totals page will look like this at the end of the year:

Self assessment tax return bookkeeping template

Once all the figures are posted for the year, you are ready to submit your figures to HMRC for self-assessment. One adjustment that needs completing is deducting the owner drawings as it is not an expense of the business. In the example, the sales are 40175.34 and expenses 36754.74 – 8400 = 28354.74. The total profit for the company is 40175.34 – 28354.74 = 11820.60.

The business owner will need to pay taxes on the profit. There are self-employed tax calculators which will calculate the taxation that is due. The best calculator is employed and self-employed.

Self Employed Bookkeeping Template

The self-employed bookkeeping template runs from April to March. If your accounting period is 6th April to 5th April, the best advice is to add the end of the year April figures into March. It keeps checking the bank figure much easier.

Full instructions on using the cash book template are available here.

Licence Agreement

To download your free monthly expense template, you must agree to our licence agreement.

By clicking on the link, you agree to the licence agreement.

How do I Keep my Books when Self-Employed?

There are several ways in which you can complete bookkeeping for the self-employed. The options include online accounting software, Excel spreadsheets and paper-based bookkeeping.

Can I Compete my own Bookkeeping?

You can complete your bookkeeping using any of the methods that you choose. Online bookkeeping software makes it easier to keep track of your transactions. We also offer free bookkeeping templates, which are used by many.

One advantage of using bookkeeping services is knowing everything that the business can claim for. If you are unsure about completing the self-assessment tax return, it is better to hire a bookkeeper or accountant.

Do I need a Business Bank Account if I am Self-Employed?

It is better to have a business bank account if you are self-employed. It enables you to keep your personal and business transactions separate. Most banks will offer a business account.

How to I Know How Much Tax to Pay?

As a self-employed business, you will need to pay income tax and national insurance.

When you complete a self-assessment tax return the tax is calculated. If you want to calculate it before submitting the tax return there is a good calculator at Employed and Self-Employed.

Conclusion on Bookkeeping for Self-Employed

Bookkeeping for the Self-employed can be done in various ways, but using online accounting software is the most efficient way to keep track of your transactions.

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.

Best Accounting Software for Self-Employed