Having kept your business records for the year, you must then complete the ‘standard accounts information’ section of your annual Self-Assessment Return and to do this most businesses firstly prepare a set of accounts. Many businesses will employ an accountant although there is no requirement for you to do so.
Firstly, you must calculate the income that you have generated during the year bearing in mind that the income should be declared on an earnings basis (normally based on the invoice date) rather than a receipts basis (when the payment is received).
That is to say, you will pay tax on the income you have earned during the year rather than the money you have received.
Key tips for record keeping
- Always issue invoices/receipts to your customers and keep copies, along with details of any quotes you also provided.
- Always get and keep receipts or invoices relating to expenditure, no matter how small the amount.
- Keep your personal and business matters separate e.g. separate bank accounts and separate records.
Annotate bank statements for the source and nature of receipts and the destination and nature of withdrawals, where it is not clear what the item is.