Self-employed accounting guide

1. Register as a sole trader

Basically tell HMRC that you’re self-employed. Here's a step-by-step guide to registering as self-employed.

You might also want to read the most common questions related to setting up as a sole trader here.

2. Let HMRC know which accounting method you prefer

When you register as self-employed, you are given the option between cash basis and traditional accounting.

We recommend just ticking "cash basis" as frankly it's the best one for 99% of self employed: you simply track what goes in and out of your bank account.

3. Set up a business bank account

Keep your business and personal finances separate:

  • It makes things much easier if the taxman ever comes knocking
  • You need a business bank account if you ever want to take a business loan.

4. Record income and expenses correctly

While you don’t need to show your receipts when you submit your tax return, HMRC will want to see them if ever they decide to audit you. You must keep records for 5 years after the tax return deadline.

5. Look into registering for VAT

You should register if:

  • You're planning on making over £85,000.
  • You want to claim back VAT on eligible expenses.

Also, many companies only work with VAT-registered freelancers - something to keep in mind.

6. Submit your tax return every year

You must submit it by the end of January of the following tax year.

For example: the tax year is April 6th 2017 to April 5th 2018, and you have until January 31st 2019 to submit your tax return.

We recommend you start well in advance - it’s easy to make mistakes. You must also pay by the same deadline.

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Who our service is for

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What will happen next

  • We'll guide you through a few questions about your income and suggest related tax deductions
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