Bookkeeping is the essential practice of recording all the money coming in and going out of your business. It’s not just tedious compliance—it’s the real-time data that tells you if you’re profitable. Accurate records are necessary for tax compliance and are the foundation for the financial terms covered in [Accounting Basics for Small Businesses].

1. Bookkeeping: The Essentials

Good bookkeeping means recording every financial transaction consistently. This simplifies tax filing, makes it easier to track your growth, and minimizes the risk of costly errors or fines from HMRC.

Simple Practices

• Separate Finances: Always use a dedicated business bank account. This creates a clear distinction between personal and business funds, which is legally required for Limited Companies and strongly recommended for Sole Traders.
• Keep Records: You must keep records of all sales, income, and business expenses. This includes receipts, bank statements, and invoices.
• Digital is Mandatory: The UK tax system is moving toward Making Tax Digital (MTD). All VAT-registered businesses must already use MTD-compliant software. This initiative is expanding, so getting familiar with digital records now is critical.

Required Retention

How long you must keep records depends on your structure:

• Sole Traders: Keep records for at least five years after the 31st January submission deadline of the relevant tax year.
• Limited Companies: Keep records for six years from the end of the last company financial year they relate to.

2. The Critical UK Tax Deadlines

Missing these deadlines results in automatic penalties from HMRC. Mark them clearly based on whether you are a Sole Trader or a Limited Company.

For Sole Traders (Self-Assessment)

The tax year runs from the 6th April to the 5th April the following year. All dates below relate to the tax year that just ended.

• Registration Deadline: Notify HMRC you need to file a tax return by 5th of October following the end of the tax year. Penalty: Up to £100 if you miss the subsequent 31st January deadline.
• Filing (Online): Submit your Self-Assessment tax return by the 31st of January following the end of the tax year. Penalty: £100 automatic penalty, rising after 3 and 6 months.
• Payment: Pay the balance of tax owed for the previous year by the 31st of January following the end of the tax year.
• Payment on Account (First): Make the first advance payment toward the next year’s tax bill by the 31st of January following the end of the tax year.
• Payment on Account (Second): Make the second advance payment toward the next year’s tax bill by the 31st of July following the end of the tax year.

For Limited Companies (Corporation Tax & Accounts)

These deadlines are based on your company’s own financial year end date, not the 5th April tax year end.

• Annual Accounts (Companies House): File full statutory accounts 9 months after the company’s financial year end.
• Corporation Tax Payment (HMRC): Pay tax owed 9 months and 1 day after the company’s financial year end.
• Company Tax Return (CT600): File the tax return with HMRC 12 months after the company’s financial year end.
• Confirmation Statement: Annual update confirming company details (directors, shareholders) is due 14 days after the anniversary of the company’s incorporation.

VAT Deadlines (If Registered)

• VAT Returns and associated payments are due 1 month and 7 days after the end of your VAT accounting period (usually quarterly). Since Making Tax Digital is mandatory for all VAT-registered firms, these must be submitted using compatible software.

The Bookkeeping Takeaway

Bookkeeping doesn’t have to be complicated. By committing to separating your finances, using digital software, and setting aside a few hours each week to record expenses, you will keep on top of the deadlines and avoid penalties.

Our advice: If the filing requirements for a Limited Company seem overwhelming, consult a local professional (as recommended in [Accounting Basics for Small Businesses]). Many accountants can handle all filing, payroll, and compliance for a simple monthly fee, saving you time and stress.