Susan says… Number 1 – Tax Returns for a Sole Trader

Our Business Advisor, Susan George, is a highly effective economic development professional with extensive senior management experience in both the private and public sector. We wanted to make the most of Susan’s wealth of experience and she hints and tips on relevant topics throughout the year.

We asked Susan:

Question – What records do HMRC need me to keep to complete my tax return as a Sole Trader?

As a sole trader, you are required to keep certain records to complete your tax return. According to the UK’s official tax manual, these records include:

Sales and Income: This includes all money coming into your business. This could be from sales of goods or services, or any other income, such as money you’ve earned from subletting a part of your business premises.

Business Expenses: You need to keep a record of all business expenses. This could include costs like rent, utilities, insurance, staff wages, and any money spent on advertising.

Accounting Method: You’ll need to choose an accounting method. Many businesses use traditional accounting where you record income and expenses by the date you invoiced or were billed. Alternatively, most small businesses with an income of £150,000 or less can use cash basis reporting. With this method, you only record income or expenses when you receive money or pay a bill.

Personal Income: You’ll also need to keep records of your personal income.  This could include income from employment, property or dividends.

VAT Records: If your turnover is £85,000, you must register for VAT and keep records of your VAT accounts.

Records for the Construction Industry Scheme: If you’re working in the construction industry as a subcontractor or contractor, you need to register with HMRC for the Construction Industry Scheme (CIC) and keep relevant records.

Remember to keep these records for at least 5 years after the 31 January submission deadline of the relevant tax year.  This is because HMRC may check your records to make sure you’re paying the right amount of tax.

To complete your tax return as a sole trader, you need to keep records of all sales and income, all business expenses, your chosen accounting method, your personal income, VAT records if applicable, and records for the Construction Industry Scheme if applicable.

Useful Links

1: https://gov.uk/self-employed-records/print

2: https://gov.uk/set-up-sole-trader/print

3: https://gov.uk/find-utr-number/print