Fortunately, once you know what is required, there isn't too much to keep track of, and a few small tips can make a big difference in how easy your bookkeeping is.
First of all, it's important to register with HMRC for self-assessments. They will provide you with an online account for filing your self-assessments each year on 31 January. Each tax year runs from 6 April to 5 April of the following year, and your base personal income allowance for the 2019/2020 tax year is £12,500. Any income after deductions above this threshold will be taxed.
Depending on your yearly turnover, you may also be required to register for VAT. The current registration threshold for mandatory registration is £85,000, but there are some advantages to voluntarily registering, such as claiming back VAT on business purchases.
Sole traders are legally considered the same entity as their business, but it makes things much simpler to open up a separate bank account for all business-related matters. Having everything pre-sorted when it comes time to file your self-assessment tax return can dramatically speed up the process.
Keeping a separate bank account will simplify the record keeping process, but it's important to track of all income and expenditure above and beyond the bank records. Maintain a file of all your receipts and invoices, ideally in a digital format that can be backed up to an off-site location. Document scanners and mobile phone apps often have features for designed for scanning receipts, making it even easier to keep track of them all.
Proper records make it much simpler to ensure that you're properly claiming all of your business expenses. If you work from home, you can write off a portion of your electric bill, rent and any other expenses related to your home office. Additionally, the cost of inventory, employee wages, travel expenses, office equipment, advertising and more can be written off to reduce your overall tax bill.
Of course, many sole traders don't want to bother with determining all of the tax implications of their business activities themselves and hire qualified accountants to handle the work. Some avoid it at first because of the perceived expense, but the peace of mind it creates quickly pays for itself. As if that wasn't enough accounting