Congratulations – You’re running your own business!
As a self employed individual, it is essential that you keep on top of your paperwork. When running a business, it is important to know about all your incomings and outgoings to ensure that you comply with your tax responsibilities.
Income and Expenditure
To put things simply, your business will have two key financial items, income and expenses. These are the complete opposite, income being any money which comes into the business, and expenses are money going out.
Example: In a cake shop, income would be from sales of a cake, and expenses could be money being spent on ingredients to make the cake.
It is very important to keep a log of all income and expenditure which your business makes, and this guide is designed to help you with information about what you will need to record for when you complete your annual tax return.
Tax returns are a very simple thing – HMRC wants to know information which we’ve just discussed above – all of your income and all of your expenses. From this, you’ll be able to work out your profit (or loss) for the year, and HMRC will confirm how much tax you will need to pay, or if a refund is due to you.