Five April gets far less attention than 31 January, but it is the date that actually shapes your books. The tax year for sole traders runs from 6 April to 5 April, and whatever you close on that date is what your Self Assessment return gets built from. Leave it until January and you will spend a fortnight chasing receipts, guessing at mileage and rebuilding a spreadsheet from bank statements. A few focused hours now saves all of that.
Here is a workable end-of-year routine, in the order most people find easiest.
1. Reconcile every account that touches the business
Before you look at income or expenses, make sure your records agree with reality. Work through the current account, any savings account you use for tax, credit cards, payment apps and the cash tin.
- Match each business transaction in your bookkeeping software to the bank or card statement.
- Investigate anything that appears in one place but not the other. It is usually a duplicate entry, a missing receipt, or a personal payment made from a business account.
- Tag personal spending as drawings, not as an expense. HMRC only allows costs incurred wholly and exclusively for the business.
- Record cash takings as you go. A shoebox of notes opened in January is difficult to explain and easy to get wrong.
If the reconciliation is painful, treat that as useful information. Fix the process now rather than repeating the same scramble next April.
2. Confirm your income, including what you have not been paid
Add up what you invoiced and what you actually received, and understand the gap between the two. Most sole traders now use the cash basis by default, which means turnover is simply the money that came in during the tax year. If you use the accruals basis instead, income is recognised when you earn it rather than when it lands. Check which basis applies to you before you total anything, because the two can give very different answers.
Three things to look at while you are in there:
- Unpaid invoices dated before 5 April. They may not count in this year's figures on the cash basis, but record them so you follow them up.
- Bad debts. If a client has genuinely gone under, note the amount and the reason. Relief depends on your basis, so check before writing it off in the books.
- Money received in advance for work you will carry out next year. That may belong to the following tax year.
Other income belongs on the return too — rental profit, savings interest, dividends, a share of a partnership. If it appears on your tax return, your records should show it.
3. Sweep the year for missing expenses
Small claims add up. Go through the year month by month and look for costs that never made it into the software: software renewals paid on a personal card, postage, parking, a course you attended, bank charges, professional indemnity insurance, accountancy fees, phone bills.
- Usually allowable: materials and stock, advertising, business insurance, travel to temporary work sites, professional subscriptions, a reasonable proportion of phone, internet and home costs.
- Usually not allowable: ordinary personal meals, client entertaining, fines and penalties, ordinary clothing, and anything with no clear business purpose.
If your gross trading income for the year was £1,000 or less, the trading allowance may mean you do not need to declare it at all — but using it usually means giving up your expense claims. Run the numbers both ways rather than assuming.
4. Separate capital spending from everyday costs
Laptops, tools, machinery, a van: these are capital items, not routine expenses. You claim capital allowances rather than deducting the full cost as a normal business cost. In practice, the annual investment allowance often gives full relief on plant and machinery in the year you buy it, which is why plenty of sole traders end up with the whole amount relieved at once.
Keep a simple fixed asset list showing what you bought, the date, the cost and any personal use. That single page makes the claim straightforward and gives you something to point to if HMRC ever asks.
5. Check mileage, stock and home-office claims
These three areas cause more incorrect returns than almost anything else.
Mileage
You can use simplified mileage rates — 45p per mile for the first 10,000 business miles in a car or van, and 25p per mile after that — or claim a business proportion of actual running costs. Pick one method per vehicle and stick with it. A dated mileage log is the evidence; a total written down in March is not.
Stock
A stocktake at 5 April matters if you use the accruals basis. On the cash basis, stock is generally handled when you pay for it. Confirm which treatment applies to you before you adjust anything.
Working from home
You can use HMRC's simplified flat monthly rates based on hours worked from home, or claim a reasonable proportion of actual household bills. A round percentage plucked from nowhere will not survive scrutiny.
6. Tidy the records and back them up
Keep your business records for at least five years after the 31 January filing deadline for the relevant tax year. Digital copies are fine; blurred photos of faded receipts are not. Back everything up to cloud storage, an external drive, or ideally both, and name files consistently so you can find an invoice in thirty seconds rather than thirty minutes.
It is also worth checking whether Making Tax Digital for Income Tax applies to you for the coming year, as the rules are being introduced in stages. If you are anywhere near a threshold, talk to an accountant before the year turns.
7. Work out what you owe, then diarise the deadlines
Once the figures are in, estimate your profit and set aside a sensible proportion of it in a separate account. Do not spend it on equipment in June and hope for the best in January. If you already make payments on account, factor those in so you are not surprised twice.
- 5 October: register for Self Assessment if you are newly self-employed and need to file.
- 31 October: deadline for a paper return.
- 31 January: online return and payment deadline, plus any balancing payment.
- 31 July: second payment on account, if one applies to you.
Late filing and late payment both attract penalties and interest, so put reminders in your calendar now rather than trusting your memory in the middle of a busy January.
Make 5 April the easy date, not the dreaded one
None of this is complicated; it is just easier done in small pieces than in one panicked weekend. Reconcile, confirm income, sweep expenses, deal with assets and the awkward areas, back up your records, then set the money aside. Do that and your Self Assessment becomes a data-entry job.
If your circumstances are unusual — property income, VAT, employees, overseas work, or a business that has changed shape during the year — take professional advice rather than guessing. Getting the treatment right the first time is almost always cheaper than correcting it later.
Photo: AymaneJed / Pixabay
