Advice needed with setting up as self employed

shiningfaery

I am preparing myself to be self employed and have been looking at what records I need to keep etc on HMRC website but one thing that hasnt been answered is Income.

I will be working freelance and recieving predominantly cash payments so how do I prove how much I earn if there is no paper trail showing this, there will be no invoices or payslips I will provide a service and recieve cash for that service, no receipts, no tills.

I will be depositing the cash into a bank account so I assuming that if I keep this bank account purely for the business income and expenditure this would be sufficient but I want to check with someone who has more experience of this.

shiningfaery

blondebubbles wrote: »

Why no invoices?

I doubt simply having a business account would be sufficient as you would have no way to prove that you deposited all cash received.

Thats why I am asking to show that I am, there is no invoices as its not something that is provided in my industry, I will be working as a freelance Hairdresser so my clients dont get invoiced.

Mattygroves2

No reason you can't use a receipt book and give them a receipt every time you receive money. If they then put it straight in the bin then that is their choice.

Other than that you need to keep records that show where you've been and the cash received. You'll need that sort of detail to do your mileage claims anyway. A spreadsheet with dates names and amounts should be sufficient which then ties in with mileage data.

tomtontom

Agreed, you should be giving receipts for work done. You keep a copy of the receipt for your records and enter them into your accounts at the end of the day.

shiningfaery

If i am working in a salon self employed? what should the owner be providing for me to prove my income?

shiningfaery

Thank you this is very helpful. Glad I asked in here, always helpful responses.

Pennywise

Nothing wrong in not keeping a receipts book and not providing invoices. HMRC don't expect it for a cash based business. BUT you do need robust records, the nature of which depend on the business.

If you have, say, 10 customers per day at £10 each, then it's not unreasonable to keep a diary showing customer names, amounts and service provided for each day.

By contrast if you run a market stall and have 100 customers spending £1 each, then clearly it is unreasonable to note every single transaction.

At the end of the day, the "proof" is whether your accounts stack up under scrutiny. HMRC know the average income and profit levels for each kind of trade. If their figures show the typical full time hairdresser produces income of £30k per year, yet your tax return shows just £10k, then expect a tax enquiry and then it's up to you to prove your income was only £10k - a diary showing what work you did, for whom and when you did it will help you prove that and any shortfalls can be explained by holidays, illnesses, salon closures, etc etc as long as you make a note in your diary why income for a particular day was less than normal.

Pointless keeping a receipt book if customers don't expect a receipt - just as much risk of you not recording a sale so it really doesn't help argue against any HMRC challenge.