Bookkeeping is the unglamorous habit that makes everything else in your tax life easier. If you are a sole trader, good records mean an accurate tax return, no missed expenses, and answers ready if HMRC ever asks questions. Here are the basics in plain English, with a simple routine you can start this week.
Key takeaways
- Record every sale and every business cost, and keep the evidence.
- Use a separate business bank account if you can.
- Update your records weekly or monthly, not once a year.
- Keep records for the period HMRC requires. Check GOV.UK.
- Making Tax Digital may require software and digital records, so plan ahead.
What is bookkeeping?
Bookkeeping is recording the financial transactions of your business: money coming in, money going out, and what each payment was for. Accounting then uses those records to produce figures for your tax return. HMRC sets out what a self-employed person must keep on GOV.UK's self-employed records page. If you are weighing up help, see our comparison of a bookkeeping service vs DIY.
What to record
| Record | What to capture | Evidence to keep |
|---|---|---|
| Income | Date, customer or platform, amount | Invoices, platform statements, bank entries |
| Expenses | Date, supplier, amount, purpose | Receipts, supplier invoices |
| Vehicle use | Business mileage or running costs | Mileage log, fuel receipts |
| Assets | Equipment bought for the business | Purchase receipts |
| Drawings | Money you take for personal use | Bank transfers |
Set up a simple system
1. Separate your money
A business bank account means every transaction in it is business related. It removes the sorting job and makes it easy to match your records to your bank.
2. Choose your tool
A well-organised spreadsheet can work for a very simple business, but accounting software saves time and usually handles bank feeds, receipts and reports. If Making Tax Digital for Income Tax applies to you, you will need compatible software and digital records. Our MTD eligibility guide explains who is affected.
3. Capture receipts straight away
Photograph receipts on the day you get them. A faded paper receipt in six months is a lost deduction.
4. Set a routine
Fifteen minutes weekly beats a whole weekend in January. Categorise new transactions, check your bank balance matches your records and file the evidence.
Know your allowable expenses
Only costs that are wholly and exclusively for business can usually be deducted. Learn the categories early so you record them correctly. Our guide to sole trader allowable expenses lists the common ones.
Worked example (illustrative)
"Nadia", an illustrative example, is a self-employed mobile beauty therapist. She opens a business account, connects it to bookkeeping software, and spends ten minutes each Friday categorising transactions and photographing receipts. At tax time her income and costs are already organised, and she reviews the report instead of building it from scratch. Compare "Greg", another illustrative example, who uses his personal account for everything and keeps receipts in a drawer. At year end he spends days trying to work out which payments were business, and he probably misses some costs. Same work, very different stress.
Common mistakes
- Mixing personal and business spending. It makes reliable records almost impossible.
- Throwing away receipts. Keep them for the required period.
- Leaving it all to the year end. Errors multiply with time.
- Forgetting cash income. All income is taxable and must be recorded.
- Treating drawings as an expense. Money you take for yourself is not a business cost.
If you would rather hand the routine over, our bookkeeping service can take it off your plate, or contact us to talk it through.
Frequently Asked Questions
What records must a sole trader keep?
You need records of all income and expenses, and supporting documents such as invoices and receipts. HMRC explains what to keep and for how long on GOV.UK.
Do I need a separate business bank account?
It is not legally required for a sole trader, but it is strongly recommended. It keeps business and personal money apart and makes your records much easier.
Is a spreadsheet good enough?
A spreadsheet can work for very simple businesses. However, if Making Tax Digital applies to you, you will need compatible software and digital records, so check your position early.
How long should I keep records?
Generally for at least five years after the 31 January deadline of the relevant tax year, but check the current guidance on GOV.UK.
How often should I update my books?
Weekly or at least monthly is a good habit. Frequent short sessions are easier than one huge catch-up at tax time.
Related reading
How Berber Accounts & Tax helps
We are a London-based, specialist gig-economy and MTD accounting practice working with fixed monthly fees. If you would like this handled for you rather than doing it yourself, we can help.
Schedule a consultation →Written by the Berber Accounts & Tax team, 124 City Road, London EC1V 2NX, United Kingdom.
Last reviewed: 3 October 2026.
This article is general information, not personal tax advice. Speak to a qualified accountant about your own circumstances before acting on it.