Bookkeeping for Newly Self-Employed: Simple UK Guide to Records, Tax & Stress-Free Self Assessment

Introduction

Congratulations on starting your self-employed journey!

Taking the step to work for yourself is exciting, but it can also feel overwhelming, especially when it comes to taxes, HMRC, and keeping on top of your finances. Many first-time self-employed people in the UK worry about “getting the bookkeeping right” and dread the thought of Self Assessment.

The truth is, good bookkeeping doesn’t have to be complicated or time-consuming. When done simply and consistently from the beginning, it saves you money, reduces stress, and gives you a much clearer picture of how your business is really performing.

In this guide, we’ll walk you through everything you need to know as a new self-employed person in the UK, including:

• What records HMRC actually expects you to keep

• How to set up a simple, effective bookkeeping system

• The most important expenses you can claim

• How to prepare confidently for your Self Assessment tax return

At Suzanne Lock Bookkeeping Services (SLBS), we’ve helped hundreds of new freelancers, tradespeople, creatives, and small business owners across Ipswich and the UK get their finances organised from day one. We specialise in making bookkeeping straightforward, compliant, and even a little bit painless.

So whether you’ve just started this week or you’re a few months in and feeling a bit lost, you’re in the right place.

Let’s get your bookkeeping set up the right way.

Why Bookkeeping Matters for Self-Employed

Getting your bookkeeping right from day one is one of the smartest moves you can make as a newly self-employed person.

Many first-time freelancers and sole traders see bookkeeping as just “something HMRC makes you do.” In reality, it’s one of the most powerful tools you have to save money, reduce stress, and grow your business with confidence.

Here’s why it matters so much:

1. HMRC Compliance & Record Keeping Rules HMRC requires every self-employed person to keep clear, accurate records of all their income and expenses. You must keep these records for at least 5 years after the 31 January deadline of your tax return. For example, if you file your 2025/26 tax return by 31 January 2027, you need to keep those records until at least January 2032.

Poor record-keeping is one of the fastest ways to get hit with fines or face problems during a tax investigation.

2. You’ll Save Thousands in Tax Good bookkeeping helps you claim every legitimate expense and deduction you’re entitled to (mileage, home office costs, equipment, software, marketing, etc.). Many new self-employed people overpay tax simply because they don’t have proper records to support their claims.

3. Real Insight Into Your Business When your books are organised, you’ll instantly know:

• How much profit you’re actually making

• Where your money is going

• Whether you can afford to take money out or invest in your business

Important Update: Making Tax Digital (MTD) From 6 April 2026, if your self-employed income exceeds £50,000 per year, you will be required to keep digital records and submit quarterly updates to HMRC. Even if you’re currently below this threshold, starting with good digital bookkeeping now will make the transition much easier (and save you a lot of stress later).

Bottom line: Strong bookkeeping protects you, saves you money, and gives you total clarity over your finances.

In the next section, we’ll show you exactly how to set up a simple bookkeeping system that works perfectly for beginners.

Setting Up Your Bookkeeping System

The good news? You don’t need to be an accountant or spend hours every week to stay organised. You just need a simple system that works for you from day one.

Here’s exactly how to set it up in four easy steps:

1. Open a separate business bank account This is the single most helpful thing you can do as a new self-employed person.

• It keeps your business money completely separate from your personal spending.

• Makes it much easier (and quicker) to do your tax return.

• Looks far more professional when clients pay you.

• Helps you avoid the #1 mistake new self-employed people make: mixing personal and business transactions.

Tip: Many high-street banks offer free “business” current accounts for sole traders (no monthly fee if you stay under a certain number of transactions). Starling, Monzo Business, Tide, and Barclays are all popular choices.

2. Choose your bookkeeping tool Pick one that matches where you are right now:

Free & Simple options (perfect for beginners):

• Google Sheets or Microsoft Excel

Low-cost MTD-ready software (recommended once you’re earning steadily):

• Pandle – very affordable and beginner-friendly

• FreeAgent – excellent for UK self-employed (now owned by NatWest)

• Xero – slightly more powerful (and a bit more expensive), this is our software of choice for all our clients

Important note on Making Tax Digital: If your turnover is likely to go over £50,000 in the next couple of years, choose an MTD-compatible tool now so you’re ready when quarterly updates become compulsory from April 2026.

3. Set up your simple chart of accounts This is just a list of categories for your income and expenses. Here’s a beginner-friendly version that works for most self-employed people:

Income categories

• Sales / Freelance fees

• Other income (e.g. interest, refunds)

Expense categories (most common ones)

• Office costs (stationery, software, phone, internet)

• Travel & mileage (45p per mile for first 10,000 miles)

• Vehicle costs (if you use a van or car for work)

• Home office (rent/mortgage interest, utilities, council tax – use the simplified flat rate or actual costs)

• Marketing & advertising

• Professional fees (accountant, insurance, subscriptions)

• Equipment & tools

• Bank charges & software subscriptions

• Training & courses

You can always add or remove categories later – start simple.

4. Deal with cash, receipts and mixed-use items

• Take a clear photo of every receipt straight away (use your phone’s camera or a free app like Google Drive, Dropbox, or Receipt Bank).

• For mixed personal/business expenses (e.g. phone bill, home internet, car), keep the full receipt and simply note the business % on it.

• Cash payments: write on the back of the receipt or in your spreadsheet what it was for and the date.

Once you’ve done these four steps, your system is ready. You now have a clean foundation that will make the rest of your bookkeeping easy and stress-free.

In the next section, we’ll look at the simple daily and monthly habits that keep everything up to date in just a few minutes a week.

Daily & Monthly Record-Keeping Habits

The good news is that once your system is set up, staying on top of your bookkeeping becomes surprisingly easy. Most new self-employed people only spend 5–10 minutes a day and 30–60 minutes once a month — and that’s enough to stay fully organised and ready for Self Assessment.

Here are the simple habits that work best for beginners:

Daily (or as soon as it happens)

• Record every payment you receive (invoice, bank transfer, cash, card, PayPal, etc.) → Note the date, client name, amount, and what it was for.

• Take a clear photo of every receipt or bill straight away. Free & easy options: – Your phone’s camera roll + a folder called “Receipts 2026” – Google Drive, Dropbox, or the free version of apps like CamScanner or Expensify

• For mileage: jot it down immediately (date, where you went, why, and number of miles). You can claim 45p per mile for the first 10,000 business miles (then 25p after that) — no fuel receipts needed if you use this rate.
  

Monthly (30–60 minutes – pick a quiet evening) Use this quick checklist:

• Reconcile your business bank account (tick off every transaction in your spreadsheet or software)

• Add any cash expenses or receipts you haven’t entered yet

• Put every receipt/photo into the correct month’s folder

• Categorise your expenses (office costs, travel, marketing, etc.)

• Have a quick look at your total income and profit so far

• Check whether you’re getting close to the VAT threshold (see below)

VAT Basics for Beginners You only need to register for VAT if your taxable turnover goes over £90,000 in any rolling 12-month period (or you expect it to very soon).

• You have 30 days to register with HMRC once you go over.

• You can also register voluntarily if you want to reclaim VAT on big purchases (vans, equipment, etc.).

• Many small businesses use the Flat Rate Scheme, which makes VAT returns much simpler and can even save you money in the early years.

If you’re comfortably below £90,000 right now, you can ignore VAT completely for the time being.

These small, regular habits mean you’ll never have a huge pile of paperwork at the end of the tax year. Everything will already be organised, accurate, and easy to find.

In the next section, we’ll look at exactly what you need to prepare for your Self Assessment tax return — and the most common mistakes new self-employed people make (so you can avoid them).

Preparing for Self Assessment & Common Pitfalls

By now, your bookkeeping is simple, consistent, and up to date, so preparing your Self Assessment tax return will feel surprisingly straightforward.

Here’s exactly what you need to do and what to watch out for.

What figures HMRC actually wants For your Self Assessment, you only need three key numbers:

• Total turnover → All the money that came into your business (sales, fees, invoices, cash, PayPal, etc.)

• Allowable expenses → Everything you spent to run the business (use the categories you set up in Section 2)

• Profit → Turnover minus allowable expenses

That’s it. You don’t need to send in every receipt — just these three figures (plus a few extra boxes for things like capital allowances or home office if you use them).

Key deadlines for the 2025/26 tax year (6 April 2025 – 5 April 2026)

• Register for Self Assessment → by 5 October 2026 (if you haven’t already)

• File your online tax return → by 31 January 2027

• Pay any tax you owe → by 31 January 2027

If your tax bill is more than £1,000, you may also have to make payments on account (two extra payments in July and January the following year). Your first return will show you whether these apply.

The 6 most common mistakes new self-employed people make (and how to avoid them)

1. Mixing personal and business money → Fix: Use the separate business bank account you opened in Section 2.

2. Forgetting to claim legitimate expenses → Fix: Keep your expense categories simple and consistent — most people miss mileage, home office, software subscriptions, and marketing costs.

3. Losing or throwing away receipts → Fix: Photo every receipt the same day and file it in a monthly folder.

4. Filing late → Fix: Put a reminder in your phone now for 5 October (register) and 31 January (file & pay). Late filing = £100 penalty straight away.

5. Not keeping records for 5 years → Fix: At the end of each tax year, move that year’s folder to an archive folder on your computer or Google Drive.

6. Thinking “I’ll sort it in January” → Fix: Spend 30–60 minutes at the end of every month (as in Section 3) and the whole job takes under an hour in January.
   

Quick Red-Flag Checklist Before you click “submit” on your tax return, ask yourself:

• Have I included all income?

• Have I claimed every expense I have records for?

• Does my profit look roughly right compared to my bank statements?

• Have I kept all records for this tax year?

If the answer is yes to all four, you’re in great shape.

With the simple system you’ve now set up, Self Assessment changes from a dreaded chore into a quick 45-minute job.

Conclusion

You’ve made it!

By following this guide, you now have a simple, effective bookkeeping system that will keep you organised, compliant, and stress-free from day one.

To recap, the three biggest benefits of getting your bookkeeping right as a new self-employed person are:

• Full HMRC compliance with zero panic at tax time

• Claiming every single expense you’re entitled to (so you keep more of what you earn)

• Real clarity on how your business is actually doing, so you can make confident decisions

You no longer need to dread Self Assessment. With the daily and monthly habits you’ve set up, your tax return will take less than an hour instead of days of hunting for receipts and worrying you’ve missed something.

At Suzanne Lock Business Services (SLBS) we’ve helped hundreds of first-time self-employed people across the UK turn bookkeeping and tax returns from a headache into a simple, sorted process.

If you’d like expert support so you can be 100% confident you’ve avoided costly mistakes and maximised every legitimate tax saving, we’re here to help.

Book your free discovery call today. We’ll review your situation, show you exactly how our tax return services work, and give you a clear plan to save time, reduce stress, and keep more money in your pocket.

→ Book your free discovery call now

You’ve already taken the hardest step by starting your own business. Let us help you protect it and grow it the smart way.

Here’s to a successful, stress-free first year (and many more after that)!