Small business bookkeeping is the foundation of your company’s financial health. It’s the daily process of recording what comes in and what goes out. For most UK SMEs, this starts as a DIY task but often becomes overwhelming as transactions grow.
What Does Bookkeeping Actually Involve?
At its core, it’s about creating an accurate financial diary. This isn’t about year-end tax returns yet—it’s the raw data that makes those returns possible.
A proper bookkeeping system handles:
- Tracking all sales and income.
- Logging every business expense and bill.
- Matching these entries to your bank statements (reconciliation).
- Securely storing proof like receipts and invoices.
Remember, if you’re self-employed, HMRC requires you to keep these records for at least 5 years after the relevant tax deadline.
Key Areas Where Bookkeeping is Critical
1. Managing VAT for Your Small Business
The VAT registration threshold is now £90,000. Once registered, your record-keeping needs to be meticulous.
Keep VAT records for at least 6 years (10 if you use certain schemes).
Under Making Tax Digital (MTD), data must be held digitally.
Common pitfalls include mis-coding different VAT rates, mixing up invoice and payment dates, and missing evidence for claims.
2. Running Payroll for a Small Company
Small company payroll services must be precise. Errors are costly.
PAYE submissions (RTI) are due on the payment date, not month-end.
Late filing penalties range from £100 to £400 per period, based on employee count.
A good payroll solutions for small business provider ensures accurate pay runs, handles starters/leavers, and reconciles liabilities each month.
Deadlines and Penalties: Why Being Organised Pays
For limited companies, Companies House deadlines are fixed. Accounts are typically due 9 months after your year-end.
Late filing penalties for a private company are:
- Up to 1 month late: £150
- 1-3 months: £375
- 3-6 months: £750
- More than 6 months: £1,500
Penalties double for consecutive late filings. Regular monthly bookkeeping avoids the year-end scramble that causes these misses.
For Self Assessment, a late filing triggers an immediate £100 penalty. Perhaps more impactful is HMRC’s late payment interest, which is currently high—adding significant cost to overdue tax bills.
When to Do It Yourself vs. Hiring a Small Company Accountant
DIY can work if you’re consistent and have very low transaction volume. It often breaks down when:
- You hire your first employee.
- You hit the VAT threshold.
- You sell through multiple channels (e.g., Shopify, Amazon).
- MTD for Income Tax becomes mandatory (phased from April 2026 for incomes over £50,000).
Seeking Bookkeeping Help for Small Business
A professional service provides control and clarity. They handle the daily recording so you have reliable figures. Look for a service that offers:
- Monthly bank reconciliation and reporting.
- Clear handover to your tax accountant for small business.
- A fixed monthly cut-off date.
Finding the Right Support
When choosing a local accountant for small business or a remote service, compare realistically.
Pricing is usually based on transaction numbers, VAT complexity, and payroll headcount.
Ask what’s included and what triggers extra fees.
A cheap accountant for small business is only cheap if their work is accurate and timely.
Final Advice
The goal isn’t just to avoid penalties. Clean books give you a true picture of your profit. If you’re always behind, start with one change: reconcile your bank account every month, on the same day, with all receipts filed. That single habit removes most of the stress and risk.
