Being a sole trader is an exciting way to run a business on your own terms. Many of us thrive on the independence and flexibility that comes with this setup, and it’s a joy to see our ideas turn into thriving ventures. Yet, when the tax year draws to a close, it can be easy to feel overwhelmed by deadlines and paperwork. We understand that juggling the demands of clients, finances and tax returns can be challenging, which is why we’re here to help.
According to the Office for National Statistics, there are around 4.4m self-employed people in the UK, showing how common it is to run a business on your own. If you’re one of these hard-working individuals, our year-end accounting checklist will help you handle your books with ease. We’ll walk you through each step so you can stay on track, claim what you’re entitled to and plan for a brighter financial future.
Gather and organise your records
The first step in your year-end accounting checklist is to make sure all your financial documents are in one place. That includes invoices, receipts, bank statements and any other evidence of your income and expenses. Sorting everything now reduces the risk of errors and makes final calculations more straightforward.
- Digital or paper: Whether your records are stored digitally or in paper form, filing them by category (such as travel, office supplies, client payments) makes it much easier to find information later.
- Stay compliant: HMRC requires you to keep your records for at least five years after the 31 January submission deadline of the relevant tax year. You can learn more about keeping records on the official HMRC page.
Review your income and expenses
Reviewing your income and expenses is a key part of understanding how your business has performed. For the 2024/25 tax year, the personal allowance remains at £12,570, meaning you pay income tax only on earnings above this threshold. Tracking your business finances carefully will help you see where you stand and if you’re likely to owe more or less than you expected.
- Income: Tally up all the payments you’ve received over the tax year.
- Allowable expenses: Identify which costs you can deduct from your taxable profits. Examples might include travel expenses, office costs or professional fees.
- Profit: Once you have your total income and allowable expenses, calculate your profit. This figure is important for working out how much tax you owe.
Reconcile your bank statements
Once you’ve noted down all your transactions, compare them with your bank statements to confirm everything matches. This step gives you confidence that you haven’t missed a payment or duplicated an expense.
- Automated tools: Many bookkeeping apps can match transactions for you, reducing the workload.
- Manual checks: If you prefer a personal touch, go through each statement by hand. Tick off every transaction so you know your figures match.
Check for outstanding payments and invoices
Unpaid invoices can affect your year-end calculations. If you’re owed money but haven’t received it yet, it will still appear as income for the period in which you issued the invoice. Meanwhile, any bills you haven’t paid should be recorded as outstanding costs. Make a list of these unpaid items, then contact clients or suppliers to settle any overdue amounts.
Claim any tax reliefs and allowances
We want you to keep more of what you earn, so remember to claim any tax reliefs and allowances you’re entitled to. For instance, if you run your business from home, you might be able to claim a proportion of your household bills. There may also be allowances for pensions or specific investments.
- Pension contributions: Contributing to a private pension plan can boost your retirement savings and reduce your taxable profits.
- Annual investment allowance (AIA): If you’ve bought certain equipment or machinery, you could deduct the full value up to the AIA limit.
- Capital allowances: Even if you can’t claim the AIA, you might still be able to claim a form of capital allowances.
Prepare for your self assessment
Although self assessment tax returns aren’t usually due until 31 January, finishing everything early will feel like a weight off your shoulders. You can register for self assessment and find official guidance on deadlines, penalties and allowances on HMRC’s dedicated page. Having your documents ready and well organised will make the final submission much faster.
Plan for national insurance
Sole traders are responsible for paying Class 2 and Class 4 national insurance contributions if their profits exceed certain thresholds. For the 2024/25 year, Class 2 contributions apply once your profits are above £12,570, and Class 4 contributions apply once you earn above £12,570 too (with a higher rate at profits above £50,270). Double-check the official figures to see where you stand, as small changes in these thresholds can have an effect on the amount you owe.
Put money aside for any tax bill
Setting money aside throughout the year is one of the best ways to avoid a last-minute scramble. If you’ve kept your profit estimates up to date, you should have a rough idea of how much to reserve for income tax and national insurance.
- Separate account: Keeping funds in a different bank account can help you avoid dipping into them accidentally.
- Regular reviews: Check every month or quarter to see if your projected tax bill has changed.
Consider professional support
Year-end accounting can be easier when you have a friendly specialist on your side. We’re a warm and supportive partner for sole traders, ready to guide you through your tax return, help you find any tax reliefs you might have missed and show you ways to keep your records more efficiently.
If you’d like to explore how our services fit your business, have a look at our advisory solutions or read about our financial reporting support. We take pride in offering a down-to-earth service that takes the stress out of accounting, so you can focus on what you do best: running and growing your business.
Prepare for the next tax year
Once you’ve taken care of your year-end tasks, it’s time to look forwards. Setting goals for the new tax year can help you stay motivated and maintain good habits.
- Budgeting: Create a budget that balances your expected income with the costs of growing your business.
- Bookkeeping routine: Stay on top of your finances by updating your records weekly or monthly. That way, you’ll have fewer surprises at the end of the year.
Our promise
We’ve helped many sole traders build confidence in handling their finances. We believe in a clear, caring approach that cuts through confusion and helps you see what’s next for your business.
If you need support with this year-end accounting checklist or want friendly advice from people who care about your success, we’re here to help. Give us a call to talk through your business goals and see how we can make things easier.
Ready to wrap up your year-end tasks with less hassle? Get in touch with us to learn how we can support your business every step of the way with year-end accounting.