When you run your own UK contractor company, it’s key to know how to organise your small business records. As part of a contractor’s bookkeeping and accounting, a person should know how to complete and keep their company or sole trader records. They should also know how to maintain business records (UK) for their UK contracting company. Indeed, when keeping business records, this includes the basic bookkeeping via a business record keeping system. It also includes maintaining the financial records for your UK contracting business. What’s more, it’s even more important for limited company directors to keep accurate records when they maintain VAT record keeping. A contractor bookkeeping spreadsheet (UK) was normal in years gone by. However, nowadays many now use limited company contractor bookkeeping software via a digital online system.
As we mention above, when running your own UK contractor limited company, you may previously have used a simple bookkeeping for contractors’ solution. This could’ve been an Excel VAT bookkeeping spreadsheet for small business. It’s common that a small business accounting spreadsheet suffices when your business is a one-person venture. However, in most cases the simple bookkeeping spreadsheet for UK contracting professionals is now a thing of the past. As a result, most now keep their records online, especially if they’re VAT registered. However, for those who prefer it and aren’t VAT registered, they can still use a contractor spreadsheet for small business accounting to record their financial transactions.
In this guide, we’ll look into business record keeping requirements for UK contractors and small business. What’s more, we’ll research the types of record keeping in business, how to maintain records for your company and the types of business records. Indeed, maintaining accounting records is key for any business. Therefore, it’s important to get this right from the outset.
Basic record keeping for business
What’s the best way to keep business records when you’re record keeping for small business? One of the best bookkeeping tips is to organise yourself with well-kept bookkeeping. What’s more, a good starting point is to ensure you keep up with the updates on a regular basis. When you’re keeping business records (UK) as a contractor or business owner, besides maintaining financial records, there may be other company records to maintain too. Indeed, these other records may include:
- Employee records -this includes personal details such as national insurance numbers.
This guide will focus on business record keeping tips. Indeed, this is in terms of how to keep bookkeeping records for a small business, including financial record keeping. Moreover, this is an especially important read for someone who is starting a business and keeping records for the first time.
Know from the outset which records to keep
Let’s suppose you’re a sole trader or a contractor starting up your own company for the first time. In this case, it’s essential to know, from the outset about company record keeping. Indeed, this includes a contractors’ bookkeeping and which records one should retain. It also includes how to update and look after your company records on an ongoing basis. As part of this, you’ll reconcile transactions in your book-keeping system to the company bank account.
If you’re a new business owner you may have various questions around how to do your company’s bookkeeping. Therefore, some common questions and thoughts around this will include:
- How to maintain accounts in business?
- How to maintain small business accounts?
- What is business record keeping?
- How to maintain company accounts?
- How to keep financial records for a small business?
- What records to keep for small business?
- How to start keeping books for a small business UK?
- How to maintain accounts for small business?
- How do I keep financial records in Excel?
- Why you need good accounting records to satisfy HMRC?
- How long do you have to keep business records UK?
In this guide, we’ll look at all of the above and find out how to keep good records for your company.
Maintain business records (UK)
How to keep accounting records for small business
When you are maintaining business records and organise these well, this will stand you in good stead. When we consider how to maintain records, if you keep up to this and ensure that the records are accurate, it’ll give you a good overall view of your company’s financial position. Indeed, when you organise your records well and are keeping business accounts, if these are accurate and up to date, you can view these at any moment in time, should you need to.
It should be every contractor and small company owner’s aim to maintain accounts record keeping to a high standard. Indeed, keeping business records up to date is quite important. When limited company directors do so as the business grows, they’ll have accurate data for their accountant to:
- Complete your business accounts for the company financial year and a company tax return. Once they’re complete, you can then file the financial statements and company tax return with Companies House and HMRC.
- Complete your tax return for the personal tax year with income details from your company and any other personal income details. Once complete, you can file your tax return with HMRC.
When you conform to the above, it’ll help you and your business stay on the right side of the various tax offices.
Use online contractor accounting software (UK)
If you use an online accounting digital service, such as FreeAgent, that’s compliant with Making Tax Digital, this’ll make your updating easier. This is in comparison to the use of a contractor bookkeeping spreadsheet which was the usual way in the past. Basically, a digital platform is, in effect, bookkeeping software online and this is a good way to maintain business records. Indeed, when you use a digital service, it’ll help streamline your business’ bookkeeping and accounting. What’s more, you can also make use of the FreeAgent invoicing system which makes sending invoices and reminders for these much easier. There’s also many other plus points, such as logging expenses and filing payroll amongst other features in digital software.
Besides key data such as your Balance Sheet and cash flow being available, small business record keeping software makes the updates to your company records with its financial transactions much easier than using a small business spreadsheet (UK) type system. Therefore, digital software helps you with your bookkeeping and financial records more effectively with regard to your company’s financial information.
Making Tax Digital (MTD) is now compulsory for VAT record keeping and the filing of VAT returns. In addition, it’ll also extend into other financial reporting areas in the future. The near future plans include MTD for landlords and Self Assessment is also on the horizon.
It’s an excellent way to start if you organise your company well from the outset. It’ll help if you always aim to manage your accounts and small business bookkeeping (UK) effectively throughout the financial year. Your contractor accountant can help and advise you with regards to accounting and record keeping for small business.
Keeping your bookkeeping records on Excel
If you’re not VAT registered, you may prefer to use a contractor or sole trader bookkeeping spreadsheet (UK) or even a business record keeping book. If you use a small business bookkeeping spreadsheet, you may ask how do you maintain bookkeeping in Excel? The answer here is you could set up an accounting spreadsheet yourself, or, your accountant may have a template small business or contractor bookkeeping spreadsheet which you can use. Whichever template you use, you should ensure that all the formulas are correct and include the relevant cells. Alternatively, if you use a record keeping book for business, you should keep this up to date by updating it regularly.
Maintain business records -the types of business records to keep
As part of keeping accounts for small business, what records should you keep when you maintain records as a UK contractor? Basically, the types of accounting records for small businesses are set out within this HMRC detailed guide. To clarify, these financial and accounting records for contractors and small businesses include:
- Cash books if you keep any offline records and use this to record transactions. Prior to online accounting, most businesses would keep a cash book to record their business transactions.
- Invoices or remittance advice for your services or sales.
- Company credit card statements.
- Payroll information (payroll records) if you run a PAYE scheme for wages.
When you’re a business owner you’ll more than likely have to complete an annual personal tax return. Likewise, you’ll also need to keep and retain records of any details for your tax return for income tax purposes.
Maintain business records -how long to keep financial records for a business (UK)
As part of your business bookkeeping, you should be aware of how long to keep your records. Therefore, let’s consider how long to keep tax records (UK limited company) for your business.
As a UK contractor or small company owner, when we look at how long to keep business records (UK) for a company, the rule in place is six years. Therefore, you should be keeping accounting records for each of your accounting periods for a minimum of six years. Accounting periods usually cover a year; therefore, for the year to 30 June 2023, you should keep the records safe until July 2029.
The purpose of saving your accounting records for six years is that you may have a VAT, PAYE, or Corporation Tax review by HMRC in the future. They’ll have a requirement to see your records, if you undergo an HMRC review. Once the six years have gone by, you can destroy the records.
Maintain business records -keep up with it
When you maintain your bookkeeping records (small business), it’s a good idea to set up a process. Basically, this process or processes will be your company or sole trader bookkeeping and record updating and you should stay on top of this from day one. While you maintain and are keeping business records, you can spend fifteen minutes per month to organise things and complete any necessary updates. Indeed, if you complete your business bookkeeping processes each month, it’s an excellent way to keep on top of it. However, if you let it slip, this’ll leave you several months to catch up on all at once.
You could keep the actual small business bookkeeping on an Excel-type contractor bookkeeping spreadsheet. You can also keep them on a digital service such as FreeAgent, especially if you should be maintaining VAT record keeping. When you’re VAT registered, you can operate on a cash or invoice basis. Most contractors and small businesses operate on a cash basis as they’re under the threshold for invoice basis. When you’re operating on a cash basis, you report VAT when you receive payments or pay suppliers. On the other hand, if you operate on an invoice basis you declare VAT when you issue invoices or when your suppliers invoice you.
Your invoices and receipts, and mileage records should be kept either on a manual or electronic basis. You can also use a mixture of these storage methods.
If you use a limited company spreadsheet, you should ensure that you save both the basic bookkeeping spreadsheet and the actual records in a safe place. It’s also wise to make a spare backup of the small business accounts spreadsheet.
Bookkeeping records -small business -move online
Today, you can still use a contractor bookkeeping spreadsheet on Excel or another system if you’re not VAT registered. You can use a basic accounts spreadsheet to keep the records for your business. However, since Spring 2019, if you’ve VAT registration in place, you should maintain VAT record keeping on a digital system. When you’re VAT registered, you’ll use an accounting method for VAT which will be either invoice or cash basis. Most contractors and small businesses operate on a cash basis therefore a digital system will let you select the VAT method. There are many other digital systems out there besides FreeAgent, however this is very popular with limited company contractors and small businesses.
FreeAgent and other online systems help improve how businesses update their books. This is a much more efficient way to maintain your VAT record keeping than the business accounts spreadsheet option. Basically, this is because they help keep the business up to date as they link directly to your company’s bank account. Most digital systems can keep accurate VAT records. If you’re operating on an invoice basis, the system should be able to cope with reporting VAT based on invoices. As part of this, it should be able to keep track of accounts receivable and accounts payable.
With a digital system, you can usually update your records on the go. Most have an app which you can download to your smartphone. When you have your records on the cloud, this’ll also mean they’re up to date with the latest bank information at any time. You can link your bank account to the accounting record keeping software. As part of keeping financial records this way, you can see a snapshot of your company’s finances at any time, wherever you are at any given time.
As part of keeping business records and maintaining a financial record keeping system, most UK contractors nowadays use a digital platform such as FreeAgent. Generally, this is now the best way to keep records for small business. When we consider bookkeeping for contractors, they’ll update and maintain business records for their UK contracting company via FreeAgent on an ongoing basis. However, for some who do not register for VAT, if they prefer, they can still use a contractor bookkeeping spreadsheet.
When you’re well-organised and keep good company records, it’ll stand you in good stead for your contractor accountant. Indeed, if you stay on top of this, it’ll also assist for your own reasons if you need to refer back to something in the future. Basically, if your records are well-kept, it’s easier to locate past transactions if a query arises in the future. Finally, it’s also important to have accurate and well-kept records in case HMRC ever do a review in the future.
Link to Contractor Advice UK group on