A Sole Trader must prepare a set of trading accounts each year to submit to HMRC along with their personal tax return. It is the responsibility of the proprietor to ensure this is done and filed within the appropriate deadline.
A set of trading accounts will contain a statement from the proprietor, stating that the accounts show a true and fair picture of the business. This will be signed by the proprietor.
They will show a Profit and Loss Statement which starts with the turnover of the business (money coming in from clients), minus all business expenses, giving you the profit or loss for the year. This is kind of a review of how well your business has done and is the bases for working out your taxable profit.
The accounts are submitted to HMRC along with your Self-Assessment tax return usually by 31 January following the end of the tax year.
There are fines and penalties in place for filing late.
This is a simple introduction to what trading accounts contain and why they have to be prepared. There are literally thousands of accountancy and taxation rules that apply when preparing a set of trading accounts and fines and penalties in place if you make a mistake - DIY trading accounts are not a great idea.
This information is for general information only. We take no responsibility for any action taken or refrained from in consequence of its contents. Always seek our professional advice specific to your circumstances before acting.