Starting out as a sole trader can feel like stepping into a whole new world, especially when it comes to managing your business finances.
The good news is that it doesn’t have to be complicated.
With a few simple systems in place, you can keep your books in order, understand your profit, and stay on top of your tax obligations with confidence.
In this guide, we’ll walk you through easy accounting tips designed especially for new UK sole traders who want to keep things simple and stress-free.
1. Open a Separate Business Bank Account
One of the smartest things you can do from day one is to open a dedicated business bank account.
This helps you clearly separate your business and personal finances, making it far easier to track income, manage expenses, and prepare for tax season.
Popular UK Banks for Sole Traders:
- Mettle (specifically built for sole traders)
- Starling Bank (free business account, user-friendly app)
- Monzo Business (great integration with accounting tools)
- TSB and Lloyds (traditional banks with dedicated sole trader accounts)
Having a separate bank account reduces the risk of missing allowable business expenses or mixing up personal purchases.
It also makes your bookkeeping much easier.
2. Use Simple Accounting Software
You don’t need to be a numbers whiz to stay on top of your accounts.
A good accounting software can handle much of the heavy lifting.
Choose a system that allows you to:
- Create and send invoices
- Record expenses
- Connect your bank account
- Track your monthly profit
- Prepare for your Self Assessment
Popular Options:
- FreeAgent (great for sole traders, easy to use)
- QuickBooks
- Xero (scalable as you grow)
Using software helps you stay organised, automate tasks, and gives you real-time insight into how your business is doing.
3. Track Your Finances Monthly
Make it a habit to sit down once a month and review your figures.
Focus on these key numbers:
- Revenue: all money coming in
- Allowable business expenses: things like travel, office supplies, subscriptions
- Profit: revenue minus allowable expenses
This gives you a clear snapshot of how your business is performing and allows you to spot trends or address issues early.
| Financial Term | Meaning |
|---|---|
| Revenue | All your income before costs |
| Expenses | Business costs that can be claimed |
| Profit | What’s left after expenses |
Use your monthly profit to:
- Reinvest in your business (training, equipment)
- Save for tax bills
- Pay yourself
4. Understand Your Tax Responsibilities
As a UK sole trader, here are the key taxes you need to be aware of:
- Income Tax: Paid on your profits over the personal allowance (£12,570 for most people in 2025/26)
- National Insurance: Class 2 and Class 4 contributions based on your profit
- VAT: Only required if your taxable turnover exceeds £90,000 in a 12-month period
You’ll need to submit a Self Assessment tax return each year, usually by 31 January for the previous tax year.
5. Tips to Reduce Your Tax Bill
- Claim all allowable expenses: from phone bills to travel, make sure you’re not missing anything
- Use simplified expenses: flat rates for things like working from home
- Invest in your business: training, equipment, and tools can be deductible
- Stay organised: good records make it easier to claim everything you’re entitled to
6. How We Help Sole Traders
At Legacy Figures Accountancy, we’re here to support you, whether you want to hand off your bookkeeping or prefer to DIY with a little help. Our services include:
- Monthly Bookkeeping: we keep your records up to date
- Quarterly Book Reviews: if you’re doing your own books, we can review them every quarter to check everything is in order
- Self Assessment: we prepare and file your return to keep you compliant
- VAT Returns: if you’re VAT registered, we handle the calculations and submissions for you
We work virtually across the UK, using cloud-based tools to keep things simple and stress-free.
Final Thoughts: What’s Best for You and Your Business?
Getting your accounting right as a sole trader doesn’t have to be complicated, but it does need consistency and a bit of know-how.
By keeping things simple, using the right tools, and staying on top of your numbers, you can run your business with more confidence and less stress.
If you’re feeling unsure about your bookkeeping, tax returns, or just want someone to double-check your setup, we’re here to help.
Got questions or need some friendly guidance? Let’s chat.
