Bookkeeping

Good bookkeeping is mostly about steady habits rather than year-end heroics. A bookkeeper, whether that is you or someone you pay, typically:

• records sales and income, including card, cash and online payments
• records purchases and expenses, with the receipt or invoice for each
• matches the business bank account to the records, known as reconciling
• keeps track of who owes the business money and who the business owes
• sorts each cost into the right category so the accountant can see what is allowable

Bookkeeping is not the same as accountancy. The bookkeeper keeps the records accurate and up to date; the accountant uses them to prepare accounts and tax returns. Some people do both, and many accountancy firms offer bookkeeping as a separate service.

Bookkeeping help is not just for big businesses. Some common examples:

• a builder who has a carrier bag of receipts and a bank statement every January
• a shop owner who has just registered for VAT and needs records ready every quarter
• a sole trader who has crossed a Making Tax Digital threshold and must now send quarterly updates
• a small company whose director would rather spend evenings on sales than on spreadsheets
• a landlord with several properties and repairs to track across each one

What you must keep depends on how you trade. Self-employed people must keep records of business income and expenses for their Self Assessment return, as well as records of personal income. A limited company must keep records of:

• all money received and spent by the company
• details of assets owned by the company
• debts the company owes or is owed
• stock the company owns at the end of the financial year, and the stocktakings used to work out that figure
• all goods bought and sold, and who they were bought from and sold to, unless the business is retail

GOV.UK says a company can be fined £3,000 by HMRC, or its directors disqualified, if it does not keep accounting records.

Making Tax Digital is changing bookkeeping more than any other rule. All VAT-registered businesses have had to keep digital records and file through compatible software for their first VAT return starting on or after 1 April 2022.

For income tax, sole traders and landlords with gross income from self-employment and property over £50,000 have been in since 6 April 2026, and the same rules reach those over £30,000 from 6 April 2027 and over £20,000 from 6 April 2028. People in the scheme keep digital records and send quarterly updates; for the 2026 to 2027 tax year the deadlines are 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027. That makes it much harder to leave the books until January, so up-to-date bookkeeping matters more than it used to. See our Making Tax Digital page for exemptions.

Many small business owners do their own bookkeeping with accounting software that pulls in bank transactions automatically, and for a business with a few dozen transactions a month that is often quite manageable. People tend to hand bookkeeping over when transactions run into the hundreds, when VAT or Making Tax Digital deadlines start arriving every quarter, or when they find the records are always months behind. A middle route is to do the day-to-day entries yourself and pay for a monthly or quarterly review.

• Will they work in your existing software, or do they want you to change?
• Is the fee per hour, per month or per transaction, and can you have it in writing with the scope of work?
• Will they also file VAT returns or Making Tax Digital updates, or only keep the records?
• Who supervises them for anti-money laundering? Bookkeepers who provide accountancy services fall within the rules, and must be registered with HMRC or supervised by a professional body.
• How will you send them receipts, and how often will the books be brought up to date?

Bookkeeping is often priced by the hour or as a monthly retainer. Xero's guide says freelance bookkeepers in the UK typically charge £20 to £50 per hour (VAT not stated). Local bookkeepers set their own rates; our bookkeeping costs guide explains what drives the price.