If you're a sole trader, the way you keep your records is about to matter more than ever. Making Tax Digital for Income Tax requires digital record-keeping in HMRC-approved software from April 2026 (for those earning £50k+ in self-employment or property income), dropping to £30k from 2027 and £20k from 2028.
For sole traders, bookkeeping is often the task that gets pushed to the bottom of the to-do list. But poor records lead to missed deductions and potential HMRC problems. Here are ten tips to make it easier.
1. Open a separate business bank account
Run the numbers yourself
→ Try the Sole Trader Tax Calculator
Run your own numbers with our free 2026/27 tax calculator(s). No email required.
This single step transforms your bookkeeping. When personal and business finances are mixed, untangling them is time-consuming and error-prone.
2. Record transactions weekly, not monthly
Set aside 20–30 minutes each week to reconcile your accounts. Little and often is far less painful than a quarterly catch-up.
3. Use cloud accounting software
Xero, FreeAgent and QuickBooks all connect to your bank and categorise transactions automatically.
4. Keep all receipts — digitally
HMRC accepts digital copies. Apps like Dext or Hubdoc let you photograph receipts on your phone and store them automatically.
5. Reconcile your bank account monthly
Check your bookkeeping records match your bank statement. Do this monthly to catch errors early.
6. Track mileage from day one
Keep a mileage log recording the date, destination, purpose and miles for every business journey.
7. Invoice promptly
Good cash flow starts with timely invoicing. Use your accounting software to send automatic reminders for overdue payments.
8. Set money aside for tax
As a sole trader, tax isn't deducted at source. Set aside 25–30% of profit in a separate account for tax.
9. Know what you can claim
Expenses must be wholly and exclusively for business purposes. If something has a personal element, only the business proportion is deductible.
10. Work with an accountant
A good accountant pays for themselves. Get in touch with Fernside Accounting for a free consultation.