Bookkeeping is an organised way to track and record the details of income and expenses by a business using bookkeeping software, printed books or spreadsheets like Excel.
All people who earn money from their self-employed activities and who operate as sole proprietors are "in business" and need to have a good bookkeeping system to track their finances. It is even more important if you are VAT Registered or a Limited Company to have up to date records for your deadlines.
Bookkeeping is part of the full accounting process which gets the business accounts ready starting from the initial entry of financial transactions all the way to filing tax returns, and for incorporated or limited businesses the preparation of year-end accounts by an Accountant.
It's HMRC way of trying to get you more on top of your finances and how much tax you need to pay. Reporting quarterly rather than once a year.
Who does it affect - if your Turnover and or Income from Property was over £50,000 in the 2025 tax year then you need to start planning as this will come into play April 2026. From April 2027 if your Turnover and Income is between £30 - £50k you will need to be set up and then the last phase of Turnover and Income of over £20k will be April 2028.
Will there still be a Tax Return at the end of the year - yes we need to do 4 submissions in the year and then the final Tax Return, to include any adjustments for the year end, this is still by the 31st January.
Can you set up early - absolutely, but you will still need to abide to the deadlines to avoid penalties.
Do I need software - you will need some software either a bridging software from Spreadsheets but it may be more beneficial to your bookkeeper if you are on a bank linked software for example Xero, Quickbooks, Sage etc. It can be a good excuse to look at how you currently run some processes in your business.
Why should you use a Bookkeeper – we are here to support you and your business, meaning you can spend more time doing the things you are good at and what makes you money.
Do I need a chartered Accountant - no you can use a suitable Bookkeeper, make sure they are insured and if possible regulated by a governing body.
Can HMRC see my bank - no they cannot, the software is a mirror of your bank transactions to which only the user of your software has access.
Do I need to pay each quarter - no it's just to file a report to HMRC.
Will there be penalties - yes for late submissions.
Payments on account - they stay the same, January and July payments.
Will this cost me more - yes but as I am a also small sole trader trying to support other small businesses I will do my best to not jump on the trends of using this as an excuse to triple my charge, this will be personal to you and I plan to try to charge monthly or quarterly for the work done so there will be no unexpected costs at the end of the year.
If you are already VAT Registered and your reporting period falls in line with the MTD you shouldn't need to do much more to process the MTD Returns.
