uk-bookkeeping

UK Bookkeeping Skill v1.1

Section 1 -- Quick Reference

Year applicability: Rules in this skill apply across 2024-25, 2025-26, and 2026-27 unless specified. The biggest 2026-27 change is mandatory MTD ITSA quarterly bookkeeping for in-scope sole traders and landlords.

Quick Reference Fields

Field	Value
Country	United Kingdom (England, Wales, Scotland, Northern Ireland)
Currency	GBP (£) only
Financial year	Flexible — companies choose their own year-end; sole traders on tax-year basis 6 April -- 5 April (basis period reform complete; clean tax-year basis for 2025-26 and 2026-27, no transitional adjustments)
Accounting standards	FRS 105 (micro-entities), FRS 102 Section 1A (small entities), full FRS 102
Governing body	Financial Reporting Council (FRC)
Tax authority	HM Revenue & Customs (HMRC)
Key legislation	Companies Act 2006 (Part 15, s.382-384 for size thresholds); The Small Companies and Groups Regulations 2008 (SI 2008/409); Taxes Management Act 1970
MTD VAT	In force for ALL VAT-registered businesses (regardless of turnover)
MTD ITSA	From 6 April 2026 for sole traders + landlords with gross income > £50,000 in 2024-25
Size thresholds (from 6 Apr 2025)	Micro: turnover ≤£1m, assets ≤£500k, ≤10 employees; Small: turnover ≤£15m, assets ≤£7.5m, ≤50 employees

3-Year Thresholds at a Glance

3-Year Thresholds at a Glance

Item	2024-25	2025-26	2026-27
VAT registration threshold	£90,000 (from 1 Apr 2024)	£90,000	£90,000
VAT deregistration threshold	£88,000 (from 1 Apr 2024)	£88,000	£88,000
MTD VAT	All VAT-registered	All VAT-registered	All VAT-registered
MTD ITSA — Phase 1 (>£50k)	Not yet in force	Not yet in force	Mandatory from 6 April 2026 (quarterly updates via compatible software)
MTD ITSA — Phase 2 (>£30k)	n/a	n/a	From 6 April 2027 (out of scope window)
Cash basis for sole traders / partnerships	Default (no income cap; election out by formal election)	Default	Default
Basis period reform	Transitional year already completed; tax-year basis from 2024-25	Clean tax-year basis — no transitional adjustments	Clean tax-year basis — no transitional adjustments
Small company (Companies Act)	Turnover ≤ £10.2m	Turnover ≤ £15m (from 6 Apr 2025), BS ≤ £7.5m, ≤50 employees	Turnover ≤ £15m, BS ≤ £7.5m, ≤50 employees
Micro-entity (FRS 105)	Turnover ≤ £632k	Turnover ≤ £1m (from 6 Apr 2025), BS ≤ £500k, ≤10 employees	Turnover ≤ £1m, BS ≤ £500k, ≤10 employees

Section 2 -- Standard Chart of Accounts (Nominal Codes)

UK practice uses 4-digit nominal codes. Ranges below follow the Sage/Xero/QuickBooks convention widely adopted.

Assets (0001–1999)

Assets (0001–1999)

Code	Account	Type
0010	Freehold Property	Non-current asset
0020	Leasehold Property	Non-current asset
0030	Plant and Machinery	Non-current asset
0040	Furniture and Fittings	Non-current asset
0050	Motor Vehicles	Non-current asset
0060	Office Equipment	Non-current asset
0070	Computer Equipment	Non-current asset
0011–0071	Accumulated Depreciation (paired)	Contra asset
1001	Stock / Inventory	Current asset
1100	Trade Debtors (Accounts Receivable)	Current asset
1101	Other Debtors	Current asset
1102	Prepayments	Current asset
1200	Bank Current Account	Current asset
1210	Bank Deposit Account	Current asset
1220	Building Society Account	Current asset
1230	Petty Cash	Current asset
1240	PayPal / Stripe Account	Current asset

Liabilities (2000–2999)

Liabilities (2000–2999)

Code	Account	Type
2100	Trade Creditors (Accounts Payable)	Current liability
2101	Other Creditors	Current liability
2102	Accruals	Current liability
2200	VAT Control Account	Current liability
2201	VAT Input (Purchases)	Current liability
2202	VAT Output (Sales)	Current liability
2210	PAYE / NIC Liability	Current liability
2220	Corporation Tax Liability	Current liability
2300	Bank Loan (< 1 year portion)	Current liability
2310	HP / Finance Lease (< 1 year)	Current liability
2400	Bank Loan (> 1 year)	Non-current liability
2410	Director's Loan Account	Non-current liability
2500	Hire Purchase (> 1 year)	Non-current liability

Equity (3000–3999)

Equity (3000–3999)

Code	Account	Type
3000	Share Capital (Ordinary)	Equity
3001	Share Premium	Equity
3100	Retained Earnings	Equity
3200	Dividends Paid	Equity
3300	Owner's Capital Introduced (sole trader)	Equity
3301	Owner's Drawings (sole trader)	Equity

Revenue (4000–4999)

Revenue (4000–4999)

Code	Account	Type
4000	Sales — Standard Rate (20% VAT)	Revenue
4001	Sales — Reduced Rate (5% VAT)	Revenue
4002	Sales — Zero Rate (0% VAT)	Revenue
4003	Sales — Exempt	Revenue
4004	Sales — Exports (outside UK)	Revenue
4100	Other Operating Income	Revenue
4200	Discount Allowed	Contra revenue

Cost of Goods Sold (5000–5999)

Cost of Goods Sold (5000–5999)

Code	Account	Type
5000	Purchases — Goods for Resale	COGS
5001	Purchases — Materials	COGS
5100	Carriage Inward	COGS
5200	Direct Labour / Subcontractor Costs	COGS
5300	Stock Adjustments	COGS

Operating Expenses (6000–6999)

Operating Expenses (6000–6999)

Code	Account	Type
6000	Rent	Overhead
6001	Rates	Overhead
6010	Light, Heat and Power	Overhead
6020	Insurance	Overhead
6030	Repairs and Maintenance	Overhead
6040	Cleaning	Overhead
6100	Wages and Salaries	Overhead
6110	Employer's NIC	Overhead
6120	Employer's Pension Contributions	Overhead
6200	Advertising and Marketing	Overhead
6210	Printing, Postage and Stationery	Overhead
6220	Telephone and Internet	Overhead
6230	Computer Software / SaaS	Overhead
6240	Professional Subscriptions	Overhead
6300	Travel and Subsistence	Overhead
6310	Motor Expenses — Fuel	Overhead
6311	Motor Expenses — Insurance	Overhead
6312	Motor Expenses — Repairs	Overhead
6400	Accountancy Fees	Overhead
6410	Legal Fees	Overhead
6420	Bank Charges and Interest	Overhead
6430	Bad Debts Written Off	Overhead
6500	Entertaining (non-deductible for tax)	Overhead
6510	Staff Welfare	Overhead
6600	Sundry Expenses	Overhead

Other Income / Expenses (7000–7999)

Other Income / Expenses (7000–7999)

Code	Account	Type
7000	Interest Received	Other income
7010	Rental Income	Other income
7100	Profit/Loss on Disposal of Assets	Other income/expense
7200	Grants Received	Other income

Depreciation and Tax (8000–8999)

Depreciation and Tax (8000–8999)

Code	Account	Type
8000	Depreciation — Property	Expense
8010	Depreciation — Plant and Machinery	Expense
8020	Depreciation — Fixtures and Fittings	Expense
8030	Depreciation — Motor Vehicles	Expense
8040	Depreciation — Computer Equipment	Expense
8100	Corporation Tax Charge	Tax expense
8200	Dividends Receivable	Other income

Section 3 -- Revenue Recognition

Cash Basis vs Accruals Basis

Cash Basis vs Accruals Basis

Criterion	Cash Basis (Sole Traders)	Accruals Basis
Eligibility	Default for sole traders & partnerships from 2024-25 (no income cap since reform); election out by formal election	All entities; mandatory for companies
Income recognised	When cash received	When earned (invoice date)
Expenses recognised	When cash paid	When incurred
Debtors / Creditors	Not used	Required
Stock adjustments	Not required	Required (opening/closing stock)
Capital items	Treated as expense when paid (except cars)	Capitalised and depreciated
Interest restriction	£500 for cash basis	No restriction for accruals

Companies Act Recognition

• Revenue recognition under FRS 102/105 — Under FRS 102/105, revenue is recognised when: Goods: risks and rewards of ownership transferred; Services: percentage of completion or when service delivered; Long-term contracts: stage of completion method (FRS 102/105)

Section 4 -- Expense Classification

HMRC Self-Assessment Categories (SA103)

For sole traders, HMRC groups expenses on form SA103:

HMRC Self-Assessment Categories (SA103)

SA103 Box	Category	Nominal Codes
Box 17	Cost of goods sold	5000–5300
Box 18	Construction industry subcontractor costs	5200
Box 19	Wages, salaries and other staff costs	6100–6120
Box 20	Car, van and travel expenses	6300–6312
Box 21	Rent, rates, power and insurance	6000–6020
Box 22	Repairs and maintenance	6030
Box 23	Phone, fax, stationery, other office costs	6210–6230
Box 24	Advertising and business entertainment	6200, 6500
Box 25	Interest on bank/business loans	6420
Box 26	Bank charges, credit card charges	6420
Box 27	Irrecoverable debts written off	6430
Box 28	Accountancy, legal, professional fees	6400–6410
Box 29	Depreciation and loss on sale of assets	8000–8040
Box 30	Other business expenses	6600
Box 31	Total allowable expenses	Sum

Non-Deductible Expenses (UK Tax)

• Non-deductible expenses list — Business entertaining (clients) — disallowed for income tax/CT; Personal expenses — not wholly and exclusively for trade; Fines and penalties — public policy; Capital expenditure — must go through capital allowances; General provisions — only specific bad debts are allowable

Section 5 -- Asset vs Expense Thresholds

Capital Allowances (Not Accounting Depreciation)

UK tax does NOT use accounting depreciation — it adds back book depreciation and substitutes capital allowances.

Capital Allowances (Not Accounting Depreciation)

Allowance	Rate	Notes
Annual Investment Allowance (AIA)	100% up to £1,000,000	Most plant & machinery; NOT cars
First Year Allowance (40%)	40%	From 1 Jan 2026 for unincorporated businesses
Full Expensing	100%	Companies only, new P&M (from April 2023)
Main Pool WDA	18% reducing balance (14% from April 2026)	Items not covered by AIA
Special Rate Pool WDA	6% reducing balance	Long-life assets, integral features, high-emission cars
Cars: CO₂ ≤ 0 g/km	100% FYA	Electric/zero-emission
Cars: CO₂ 1–50 g/km	18% main pool
Cars: CO₂ > 50 g/km	6% special rate
Small Pools Allowance	Write off pool balance ≤ £1,000

Accounting Depreciation (Book Purposes)

For FRS 105/102 accounts, depreciate over useful life:

Accounting Depreciation (Book Purposes)

Asset Class	Typical Book Rate	Method
Freehold property	2%	Straight-line
Leasehold improvements	Over lease term	Straight-line
Plant and machinery	15–25%	Reducing balance or straight-line
Fixtures and fittings	15–20%	Straight-line
Motor vehicles	25%	Reducing balance
Computer equipment	33%	Straight-line (3-year life)

Low-Value Items

• Low-value item policy — No statutory de minimis in UK GAAP, but common practice: items under £100–£500 expensed directly. Firms should set and document their own capitalisation policy.

Section 6 -- Profit & Loss Format

FRS 105 Micro-Entity Format (Format 2 — by nature)

PROFIT AND LOSS ACCOUNT This Year (£) Prior Year (£) Turnover xxx xxx Other income xxx xxx ──── ──── Raw materials and consumables (xxx) (xxx) Staff costs (xxx) (xxx) Depreciation and amortisation (xxx) (xxx) Other charges (xxx) (xxx) ──── ──── Tax (xxx) (xxx) ──── ──── Profit (loss) for the financial year xxx xxx

FRS 102 Section 1A Small Company (Format 1 — by function)

PROFIT AND LOSS ACCOUNT Turnover xxx Cost of sales (xxx) ──── Gross profit xxx Administrative expenses (xxx) Distribution costs (xxx) ──── Operating profit xxx Interest receivable xxx Interest payable (xxx) ──── Profit before tax xxx Tax on profit (xxx) ──── Profit for the financial year xxx

Section 7 -- Balance Sheet Format

FRS 105 / Small Company Balance Sheet (Vertical Format)

BALANCE SHEET as at [date] £ £ FIXED ASSETS Intangible assets xxx Tangible assets xxx ──── xxx CURRENT ASSETS Stocks xxx Debtors xxx Cash at bank and in hand xxx ──── xxx CREDITORS: amounts falling due within one year (xxx) ──── NET CURRENT ASSETS xxx ──── TOTAL ASSETS LESS CURRENT LIABILITIES xxx

CREDITORS: amounts falling due after more than one year (xxx) PROVISIONS FOR LIABILITIES (xxx) ──── NET ASSETS xxx ════

CAPITAL AND RESERVES Called up share capital xxx Profit and loss account (retained earnings) xxx ──── SHAREHOLDERS' FUNDS xxx ════

Section 8 -- Bank Reconciliation Patterns

Common UK Bank Formats

Common UK Bank Formats

Bank	Export Format	Key Fields
Barclays	CSV, OFX	Date, Description, Amount, Balance
HSBC	CSV, PDF	Date, Payment Type, Description, Paid Out, Paid In, Balance
Lloyds	CSV, OFX	Transaction Date, Description, Debit, Credit, Balance
NatWest / RBS	CSV, OFX	Date, Type, Description, Value, Balance
Starling	CSV, QIF	Date, Counter Party, Reference, Type, Amount, Balance
Monzo Business	CSV	Date, Name, Amount, Category, Notes
Tide	CSV	Date, Description, Money In, Money Out, Balance

Common Transaction Descriptions

Common Transaction Descriptions

Pattern	Likely Classification
FPO / FPI (Faster Payment Out/In)	Transfer — check counterparty
DD (Direct Debit)	Regular expense (insurance, utility, subscription)
STO (Standing Order)	Regular expense (rent, loan repayment)
BGC (Bank Giro Credit)	Income — customer payment
CHQ (Cheque)	Varies — check payee
DEB / VIS / MC (Card Payment)	Expense — check merchant
HMRC VAT, HMRC PAYE, HMRC CT	Tax payment — exclude from P&L expenses
STRIPE, PAYPAL, GOCARDLESS	Payment processor — match to invoices
TFR (Transfer)	Internal — possible own-account transfer

Section 9 -- Micro-Entity / Small Business Simplifications

FRS 105 Simplifications (Micro-Entities)

FRS 105 Simplifications (Micro-Entities)

Feature	Simplification
Financial statements	Balance sheet + P&L only (no cash flow, no directors' report)
Disclosures	Minimal — only advances/credits to directors, guarantees
Revaluation	Prohibited — historical cost only
Deferred tax	Not recognised
Financial instruments	All at cost or amortised cost
Leases	All treated as operating leases
Government grants	Recognised when receivable
Filing	Abbreviated accounts at Companies House (P&L not public)

Qualifying Thresholds (from 6 April 2025)

Qualifying Thresholds (from 6 April 2025)

Regime	Turnover	Balance Sheet	Employees
Micro-entity (FRS 105)	≤ £1,000,000	≤ £500,000	≤ 10
Small company (FRS 102 s.1A)	≤ £15,000,000	≤ £7,500,000	≤ 50

Cash Basis for Sole Traders

• Cash basis default and features — From 2024-25 onwards, cash basis is the default for sole traders and partnerships, with no income cap following the reform. Taxpayers may elect out via a formal election to use the accruals basis. Under cash basis: No debtors/creditors accounting; No depreciation (capital items expensed — except cars); Interest expense capped at £500; Loss relief restricted to current trade only

MTD ITSA — From 6 April 2026

• MTD ITSA mandate details — Sole traders and landlords with gross income > £50,000 in 2024-25 are mandated into MTD ITSA from 6 April 2026. This is the largest bookkeeping change in the 3-year window: Quarterly updates (digital records of income and expenses) submitted via MTD-compatible software; End-of-period statement and final declaration replace the traditional SA return for in-scope taxpayers; Digital record-keeping requirement — paper ledgers no longer sufficient for in-scope businesses; Phase 2 (>£30,000) follows from 6 April 2027. Bookkeeping software choice and chart-of-accounts mapping should be MTD-ITSA-ready for any client expected to cross the £50,000 threshold for 2024-25. (6 April 2026)

Section 10 -- Interaction with Tax Skills

Income Tax (Self-Assessment SA103/SA105)

• Bookkeeping to income tax mapping — Bookkeeping P&L feeds directly into SA103 (self-employment) or SA105 (property); Add back: entertaining, depreciation, personal element of mixed expenses; Deduct: capital allowances (in place of depreciation), trading losses brought forward; Cash basis taxpayers report income/expenses as per bank, with no accruals adjustments

Corporation Tax (CT600)

• Bookkeeping to CT600 mapping — Start with accounting profit per FRS 105/102; Adjust: add back book depreciation, non-deductible entertainment, general provisions; Deduct: capital allowances, R&D enhanced deduction if eligible; GAAR / transfer pricing for connected parties

VAT Return (Making Tax Digital)

VAT Return (Making Tax Digital)

BAS Box	Description	CoA Mapping
Box 1	VAT due on sales	2202 (output VAT)
Box 2	VAT due on acquisitions from EU	2202
Box 3	Total VAT due (Box 1 + 2)	Calculated
Box 4	VAT reclaimed on purchases	2201 (input VAT)
Box 5	Net VAT to pay or reclaim	2200 (control)
Box 6	Total sales excl. VAT	4000–4004
Box 7	Total purchases excl. VAT	5000–5300 + 6000–6600
Box 8	Supplies of goods to EU	4004 (subset)
Box 9	Acquisitions from EU	5000 (subset)

Payroll (RTI — Real Time Information)

• Payroll RTI reporting rules — Report PAYE/NIC to HMRC on or before each pay date via Full Payment Submission (FPS); Employer Payment Summary (EPS) for recoverable amounts; Nominal 6100 (gross wages) + 6110 (employer NIC) + 6120 (employer pension) = total staff cost

Disclaimer

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional (such as a chartered accountant, ACCA member, or equivalent licensed practitioner in your jurisdiction) before filing or acting upon.

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