Author Archives: accounts

Records you must keep if self-employed

If you are self-employed as a sole trader or a partner in a business partnership, you are required to maintain suitable business records as well as separate personal income records for tax purposes.

For tax compliance, these business records must be kept for at least five years from the 31 January submission deadline of the relevant tax year. For instance, for the 2023-24 tax year, where online filing was due by 31 January 2025, you must retain your records until at least the end of January 2030. In some situations, such as when a return is filed late, you may be required to keep the records for a longer period.

As a self-employed individual, you should keep a record of the following:

  • All sales and income
  • All business expenses
  • VAT records if you're VAT registered
  • PAYE records if you employ anyone
  • Records of your personal income
  • Details of any grants received if you claimed using the Self-Employment Income Support Scheme (SEISS) due to coronavirus

You don't necessarily need to keep the original physical records. Most records can be stored in an alternative format, such as scanned copies, as long as they can be retrieved in a readable and uncorrupted format.

If any of your records are lost or unavailable, you must attempt to reconstruct them. If the figures are estimated or provisional, you must inform HMRC accordingly. Failing to keep proper or accurate records can result in penalties.

Source:HM Revenue & Customs | 17-03-2025

Tax liability if you sell a business asset

When selling assets on which capital allowances were claimed, you may need to adjust your taxable profits with a balancing charge or allowance. Understanding these rules ensures you don’t face unexpected tax liabilities. Learn how to handle asset disposals correctly.

Typically, the value of the asset sold is considered to be the amount for which it was sold. However, if the asset was given away, no longer used, or sold for less than its market value, then the market value should be used.

If you initially claimed 100% tax relief on the asset, the business is required to add back the difference between the sale price and the original value to their taxable profits. This adjustment is known as a balancing charge. A balancing charge ensures that a business does not receive more tax relief than it was entitled to on the purchase of the asset. Essentially, the balancing charge operates in the opposite manner to a capital allowance, increasing the amount of profit on which tax is due.

If writing down allowances were used initially, you may face either a balancing charge or a balancing allowance.

There are specific rules that apply when calculating a balancing charge, particularly in the following cases:

  • If you originally claimed a super-deduction or special rate first-year allowances.
  • If you claimed full expensing or 50% first-year allowances.

In the year your business closes, instead of claiming capital allowances, you must enter a balancing charge or balancing allowance on your tax return.

Source:HM Revenue & Customs | 17-03-2025

Requesting evidence of earnings

If you're self-employed, lenders may require an SA302 and tax year overview as proof of earnings for mortgages or loans. These documents verify income declared on your self-assessment tax return and are easily accessible via HMRC. Learn how to obtain them.

The use of these forms has become more widespread since mortgage regulations began requiring self-employed individuals to provide verifiable evidence of income. The SA302 serves as proof of income for the last four years of self-assessment tax returns.

The SA302 document provides a detailed breakdown of the income reported on the taxpayer’s self-assessment tax return, including commercial versions of the tax return. Meanwhile, the tax year overview confirms the tax due based on the return submitted to HMRC, showing any payments made, and cross-referencing the Tax Calculation with HMRC’s records.

Self-assessment taxpayers can request an SA302 tax calculation through HMRC’s online service. After submitting an online tax return, it typically takes around 72 hours for the documents to become available for printing.

Most lenders will accept an SA302 printed directly from online accounts or from the commercial software used to submit tax returns. HMRC has been actively working with the Council of Mortgage Lenders and its members to expand the number of lenders willing to accept self-serve copies of these documents as valid proof of income.

Source:HM Revenue & Customs | 17-03-2025

Why Adequate Business Insurance is Essential for Small Businesses

For small business owners, especially those operating as sole traders or in partnerships without limited liability, having adequate business insurance is not just a safeguard—it’s a necessity. Without the legal protection of a limited company structure, personal assets such as your home and savings are directly at risk if the business faces legal claims or financial losses.

One of the most critical types of cover is public liability insurance, which protects against claims if a customer or third party suffers injury or property damage due to your business activities. Similarly, professional indemnity insurance is crucial for service-based businesses, covering legal costs if clients claim negligence or poor advice.

Additionally, employers’ liability insurance is a legal requirement if you have staff, protecting against employee injury claims. Business interruption insurance can be a lifeline in unexpected disruptions, ensuring you can recover lost income and continue operations.

Without the right insurance, a single lawsuit, accident, or unforeseen event could financially devastate a small business owner. The cost of insurance is minimal compared to the potential consequences of being uninsured. Therefore, securing comprehensive business insurance is a vital step in protecting both your livelihood and personal assets.

Source:Other | 16-03-2025

Business Advice: An Investment, Not a Cost

Flexible planning is essential for adapting to uncertainty, responding to challenges, and seizing new opportunities. The world is unpredictable, and rigid plans can quickly become outdated. Whether in business or personal life, flexibility ensures resilience and long-term success.

Unexpected events such as economic shifts, technological advancements, or personal changes can derail strict plans. A flexible approach allows for quick adjustments without having to start over. Businesses, for instance, benefit from adapting to market trends or supply chain disruptions, ensuring they remain competitive.

Opportunities often arise unexpectedly. A business that initially planned to operate solely in physical stores but later noticed a surge in online shopping must be able to pivot. Those who rigidly stick to their original plans may miss out on growth.

Managing risks is another advantage of flexible planning. If a strategy is not working, adjustments can be made rather than continuing down an unproductive path. This is particularly important in business, where adapting marketing tactics or reallocating resources can make a significant difference.

Innovation thrives in flexible environments. Companies that allow for iterative development and experimentation can improve products and services based on real-time feedback rather than relying on outdated assumptions.

Employee morale and productivity also improve when people are empowered to adapt. A rigid plan can create stress, while flexibility fosters a more dynamic, responsive workplace.

Customer satisfaction depends on adaptability. Consumer preferences change, and businesses that adjust their offerings accordingly are more likely to retain loyal customers.

Ultimately, flexible planning ensures better resource allocation, the ability to respond to competitive pressures, and the freedom to evolve with changing circumstances. Rather than being a sign of weakness, flexibility is a strategic advantage that helps individuals and organisations thrive in an ever-changing world.

Source:Other | 16-03-2025