Knowledge Centre

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.

What do trading accounts contain?

Proprietor's Statement

A set of trading accounts will contain a statement from the proprietor, stating that the accounts show a true and fair view of the business. This will be signed by the proprietor.

Profit & Loss

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.

What happens to the accounts?

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 are prepared. There are many other reasons to prepare trading accounts such as wanting to secure credit from suppliers or your business bank.