In the UK anyone receiving earned income which is not taxed under the employers paye system is technically self employed. Anyone who in self employment and running a business in the UK must register that business with HM revenue and customs within 3 months of starting that business and failure to do so can lead to penalty fines.
All businesses must keep records of the financial transactions and submit these accounts annually to HM revenue and customs in the format of the self assessment tax return which are supplementary pages included in the self employed annual tax return.
Different standards for accounting by sole traders are applicable compared to the accounting requirements of a limited liability company and consequently much simpler bookkeeping can be applied. Bookkeeping for a limited company invariably requires a double entry system of accountancy that produces not just a profit and loss account but also a balance sheet. The financial accounting solution has to deal with business bank accounts, debtors and creditors and produce reconcilable results.
While advisable for self employed businesses to maintain a separate bank account it is not an essential requirement.
The accounting software used by anyone self employed should keep accurate records of fixed assets although it is not essential that this also produces a balance sheet. With these factors in mind accounting software for the self employed can be much simpler and greatly advantageous if that accounting solution also produces the numerous and sometimes onerous burden of HM revenue and customs tax returns and working papers.
Self-employed accounting software requirements
Accounting software for anyone self-employed does not have to be double entry. The bookkeeping can be a single entry system which makes the value of using excel spreadsheets feasible and due to the simplicity highly desirable.
Such accounting software being excel based is fast and easy to use, utilising all the benefits and advantages excel offers. Small Business Accounting Software that is also highly visible at the click of a button.
Accountancy software on a database hides the financial transactions that the software has to query to retrieve the required information. It is this element of a database system that often requires some technical accountancy knowledge to operate efficiently. Accounting software written on excel spreadsheets is, due to its visibility, much easier to use and understand and requires little or no accounting experience making it an ideal small business accounting solution.
Good financial records are the key to the success of any self-employed business and especially to the value of Accounting Software. A quality accounting software package is an essential component of your business to identify potential problem areas and capitalise on success to drive the business forward.
Accounting software and HM revenue and customs returns
Different types of accounting software are available for the self-employed and some of this software has been specifically designed to cater for the precise size and requirements of the self-employed business. There are basic packages available for business that is not vat registered and have no employees. Standard packages for the business that is vat registered.
The vat threshold limit at which businesses are liable for vat is 64,000 pounds from April 2007 and subject to possible changes after that date. Advanced and more sophisticated accounting software for the self-employed who also employ staff are available with integrated payroll software included in the small business accounting software packages.
The best accounting software will not only produce the financial accounts but also produce the HM Revenue and Customs returns. Accounting software that has automated the vat returns each quarter, payroll software that completes the time consuming P11 employee deductions working papers and simplifies the P60 year end certificates and P35 employer annual paye return. And most crucially a system that automates the self assessment tax return.
Accounting software and self assessment tax returns
The self assessment tax return is a complex document for the initiated. It does not have to be, for a small business with turnover less than 15,000 pounds the self assessment tax return can be completed by entering totals of sales, expenses and net profit on page one.
For larger businesses more complex calculations are required. Capital allowances, balancing charges, base periods and expense analysis are beyond many self employed. Self-employed businessmen are experts in their field of operations and often require help with these accounting based elements that an accountant or accounting software can provide.
The best small business accounting software can take the simple lists of financial transactions and by clever use of formulae built into excel spreadsheets transform the year end experience by automating the production of the self assessment tax return. It is not impossible, if a calculation can be made mathematically then a quality accounting software package can automate the process using formulae within excel to produce the calculations and offer the businessman an automated self assessment tax return.
A function that accounting software can do at a fraction of the price an accountant might charge for this service. Small business accounting software for the self-employed should produce the self assessment tax return as the end product. The self assessment tax return is the self-employed end product of his financial endeavours and therefore the self assessment tax return has to be the end product of any quality small business software.
