I am thinking about becoming self-employed could you please tell me what business records I need to keep. - part 1 of 1

Published 01/04/2006

For the self-employed and particularly those in the photography industry, completing a tax return can be a daunting experience, but the key to lightening the burden is to keep good records. This does not necessarily involve employing a professional bookkeeper or investing in expensive computer software. An accounts ledger, diary notes or simple computer spreadsheet can be sufficient to record your income and expenditure.

One recommendation would be to have a separate business bank account. If a credit card is preferable, then again, separating business and personal transactions into two separate cards is recommended.

Separating business and personal life will make the preparation of sole trader accounts easier and quicker, it also offers a limited amount of protection from the tax authorities should they wish to enquire into your business affairs.

Those in the photography industry need to be aware of three general forms of transaction that require recording. Bank transactions, i.e. payments made from the bank and deposits made into the bank. Cash payments and cash receipts and finally credit card payments. When deciding on how to record these transactions provision should be made to identify which receipts/payments are cash, bank or credit card. For cash receipts, it is important to be able to identify any cash not deposited in the bank but used for sundry cash expenses or general living expenses.

Good record keeping is an essential part of running your own business.

Failure to maintain good records could result in payment of excessive tax. It should also be bourne in mind that bookkeeping records and supporting receipts should be retained for 5 year 9 months after being submitted to the Inland Revenue.

Finally, for those of you who have recently started to trade, the law is very strict. The Inland Revenue must now be informed within three months of commencement of trading of the self-employment - failure to do so will result in an automatic £100 penalty.

Mike Parkes is senior manager at Tax Watchdog Direct Ltd, who offer a fixed fee service for completing tax returns and accounts.

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1st Published 01/04/2006
last update 07/04/2022 09:17:53

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