Guide how to do simple bookkeeping

This is a guide how to do simple bookkeeping for small self-employed business (sole trader or partnership) in United Kingdom and Northern Ireland. It is based on cash basis system which you can use, if your turnover (gross income) is less than £150,000 a year.

You will find here more information about Cash Basis Scheme.

We have created handy template which will save you time with bookkeeping. But you can follow this guide without buying our template, just follow those basics how to prepare your sales, expenses and profit and loss account. This basic bookkeeping will help you to prepare your tax return in the end.

You can buy and download the template here. The price for the template is €9.

5 steps to prepare your bookkeeping yourself

1. Step – Business information

Input all the basic information about your business. This information is used in other tables in our spreadsheet.

Bookkeeping for self-employment cash basis

2. Step – Income/Sales

Take all your income invoices/receipts and sort them into date order. Then take the first invoice and start to fill in sales table with the date, amount and client name. Take next invoice and fill in next row the same way as the first invoice. Continue with all invoices you have for that year.

At the bottom of the table is total cell. There is a formula which will calculate amount of all invoices recorded. That number is your total gross sales (or your turnover) for a year.

How to insert more rows

Table is set up for 30 invoices. If you need more rows, then highlight row where you want to add a new row in the table with pressing left mouse button. Once highlighted, press right mouse button and from the menu choose Insert row and a blank row will be inserted in the table.

Bookkeeping for self-employment cash basis

3. Step – Expenses

Take all your expense’s invoices and receipts and sort them in date order. Start to record them with Date and Amount.

Business use in %

If the cost was partly used privately for example telephone cost, input how much of the cost was used for business in percentage range 1% – 100%. For example one half of the telephone cost is 50%. If it is purely business cost, input 100%. Then in Business Use Total cell is a formula which will calculate business amount based on the business percentage you filled in.

Type of Expense

Type of Expense is a category of expenses which you will find in your tax return, for example Advertising, Motor and travel, Office costs etc.

If your total gross income for the year is less than £85,000, you don’t need to use these categories, because HM Revenue don’t require them in your tax return. You can use Other expenses category for everything and in your self-employment tax return, you will input your total expenses into the Total expenses box.

Note/Purpose

In Note cell you can write details for what is that receipt for (a purpose of buying goods or services), for example stationary, tools, courier cost etc.

Take the next invoice and record it in the next row the same way, you recorded the first invoice. Continue with all invoices you have for that year.

At the bottom of the table is a Total cell. There is a formula which will calculate amount of all invoices recorded. The Business Use Total Total number is your total expenses for a year.

Bookkeeping for self-employment cash basis
Bookkeeping for self-employment cash basis

4. Step – Car flat rate expenses

If you are using a car for your business, you can claim buying and running costs of your car through simplified expenses, Flat rate expenses.

You claim other equipment you buy to keep and use in your business as a normal allowable business expense in the Step 3 – Expenses table.

Start to record your business mileage. Fill in Date, from where you traveled to where. Miles is a distance between those two places. For example if you have traveled from your office to your client for a meeting and then back to your office, then double the miles, because you have traveled there and back.

Rate

Current rates (updated July 2021)

VehicleFlat rate per mile with simplified expenses
Cars and goods vehicles first 10,000 miles45p
Cars and goods vehicles after 10,000 miles25p
Motorcycles24p

Check most up to date rates here.

Expenses

This cell has a formula for automating calculation in pounds.

Note/purpose

In Note cell you can write details of your journey, for example meeting with a new client etc. and you can input more details what you have discussed and name of a client for your records.

Bookkeeping for self-employment cash basis

5. Step – Profit and Loss Account

Most information in Profit and Loss Account table pop up automatically from previous tables. You only need to fill in section at the bottom of the page, Prepared by. Don’t forget to sign off, if it is for bank or other institution.

Bookkeeping for self-employment cash basis