Bookkeeping for Tradespeople: A Simple Guide.

Bookkeeping is just recording your money: what you charge, what you're paid, what you buy and what's owed, and keeping the paperwork. Your accountant (or you) uses it to work out your profit and tax.

A little every week beats a panic in January. Software can organise it, but it can't tell whether an entry's right.

• Bookkeeping: recording every bit of money in and out of the business.
• Records: the invoices, receipts and statements that prove each figure.
• Invoice: the bill you send a customer. A credit note is one that reduces or cancels it.
• Reconcile: checking your records match your bank statement.
• Cash basis: counting money when it actually comes in or goes out.
• Traditional accounting: counting money when you send an invoice or get a bill, even if it's not paid yet.
• Making Tax Digital: keeping records in software that works with HMRC, and sending updates every 3 months.
• Qualifying income: for Making Tax Digital, your income from self employment and property before costs.

Keep the payment and the paperwork together:

• Your invoices, credit notes and payments in
• Supplier bills, till receipts and online receipts
• Business bank and card statements
• Cash in and out
• Mileage, and how you split business and personal use
• VAT, CIS and payroll records, if they apply
• Contracts, finance agreements and big purchases

1. As you go: send numbered invoices, and snap a photo of every receipt.
2. Every week: record everything, and chase any missing receipts.
3. Every month: check your records against your bank, cards and cash. Look at who owes you, and how much tax money you've put aside.
4. Before filing: check anything odd, and ask for help if you need it.

Cash basis records money when it actually comes in or goes out. Traditional accounting records it when you invoice or get billed. Most sole traders now use cash basis by default.

Don't switch or mix them without understanding the tax effect. Companies use different rules.

Making Tax Digital for Income Tax started on 6 April 2026 for sole traders and landlords with qualifying income over £50,000. It drops to over £30,000 from April 2027, and over £20,000 from April 2028. Qualifying income is your self employment and property income added together, before costs. Wages from a job, dividends and pensions don't count.

It means using compatible software, keeping digital records, and sending HMRC an update every 3 months. A normal spreadsheet on its own isn't enough.

The deadlines

• Quarterly updates are due by 7 August, 7 November, 7 February and 7 May.
• Your yearly tax return is still due by 31 January.
• There are no penalties for a missed quarterly update in the 2026 to 2027 tax year. After that, each missed deadline gets a point, and 4 points means a £200 penalty.

HMRC says self employed records must be kept for at least five years after the 31 January deadline for that tax year. Other taxes and companies can have different periods.

Keep readable backups, and keep customers' and financial details safe. A receipt photo you can't find or read is no use.