What is a Virtual Bookkeeper?

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Something that I hear all the time is "I don’t need a bookkeeper — my accountant handles everything." Let me myth-bust that statement.  An accountant handles compliance, analysis, tax strategy and advice and submits your returns. A bookkeeper provides accurate records and relevant details that the accountant needs in order to file those returns.  A well organised business needs both! Where an accountant will check your financials quarterly or annually, a bookkeeper will check your account daily to avoid errors in your financials such as:

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• Missing tax deadlines and incurring extra penalties, especially with the new Making Tax Digital (MTD) which came into operation in April for any self employed individual with an income over the £50K threshold.

• Incomplete transactions - this still occurs even when using automated receipt recognition software as they cannot always capture all of the information and you will need to go into your software and update it from draft and approve when corrected.

• Incorrect classification of VAT - a standard rate of tax may be programmed into your software but not all purchased items from that vendor may be vatable so you will end claiming more VAT than is allowed and have to pay back those claims with possible fines to HMRC. You could also end up paying more VAT then you need as AI will split out the VAT on your receipt where some items may be non-vatable.

• Incorrectly entered amounts from automated receipts - this often occurs where AI has picked up a figure from a receipt which may not include credits or gratuities (all of which need to be reconciled separately).

• Missed client payments, a bookkeeper can help by chasing up late payments.

• Cash-flow gaps can be checked and you can be alerted before any potential problems arise.

 

Don't wait until the last minute to look at your finances. Bookkeeping monthly helps you to keep your finances correctly reconciled, categorised and organised so you dont have to spend hours finding information your accountant needs at the last minute. 

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​What are the legal implications of hiring a Virtual Bookkeeper?

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A well-established, experienced Bookkeeper should provide you with the following information, not all of these documents will be required for each business but some are quite fundamental in ensuring the protection your business and your clients:

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• A non-disclosure agreement

• Terms and conditions which should also set out hours agreed and rate

• Their professional insurance (including cyber) certification.

• Anti-money laundering supervisory certification (if applicable)

• ICO certification (if applicable)

• Professional and Public Indemnity Insurance

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Making Tax Digital Changes

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MTD has arrived and if you are a self-employed business owner with income exceeding £50K you will need to register now. As part of the government's plans to modernise the tax system, there will be a full transition over the next couple of years and every self-employed person will need to provide quarterly updates to HMRC or face fines. Hiring a bookkeeper to ensure your documentation is ready to submit is another thing you don't have to fit into your busy schedule.

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HMRC have introduced a multiple agent solution for keeping your records, this means that you can employ a bookkeeper along with your Accountant, great news for keeping your costs down. So, if you are looking for an HMRC registered bookkeeper, who can help submit your quarterly submissions on time and prepare your records for your VAT Accountant, get in touch and save yourself time which can be spent securing more clients! ​

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Threshold Income Levels

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• Over 50K from income or properties as of April 26 (April 24 to April 25)

• Over 30K from income or properties as of April 27 (April 25 to April 26)

• Over 20K from income or properties as of April 28 (April 26 to April 27)

• If you earn less than 20K then you do not need to sign up for MTD.

 

New business return dates differ slightly an example is shown below.  If your return is for only 6 months of accounting HMRC will us an equation of ‘double’ the income based on your first 6 months to obtain your qualifying income.

 

New Business Starts            May 26

First Tax Return to Input      Tax Year 2026 to 2027

First Tax Submission            31st January 2028

 

You would then need to start using MTD from 6th April 2028

                   

Keeping Records

                                     

MTD means that you have to keep digital records of your self-employment and property (or any shared property) income using MTD compatible software which records your income and expenses by category, these then need to be submitted quarterly to avoid penalties.

 

There are certain rules for recording expenses which your Bookkeeper will be aware of and which you may not for example, if you are claiming a part mortgage payment you must record a digital entry of the interest and if you are entering an expenditure that is part capital and part revenue, you would only record the revenue amount.

 

If you have more than one business, you have to record and submit records for each business separately. If you have a lot of transactions this may take you time to sort out and record, a bookkeeper can keep on top of this for you and ensure the correct entries are made for each business.

 

If you have more than one UK property, then you can treat all UK property as one ‘UK Property Business’. Likewise, if you have more than one overseas property then you treat all your overseas property as one ‘Foreign Property Business’.

 

Requirements

 

You will need compatible software, for example Xero or QuickBooks, compatible packages are shown in this HMRC link:

 

If you are thinking of using a spreadsheet such as Excel, you will still need to ensure that you link with digital software, this means that you must not manually edit or ‘cut and paste’ or copy records within a spreadsheet if it has been included in a quarterly update – something to remember and another thing to keep a check on if you are thinking of doing your own Bookkeeping!

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There is a great LI post by Lucy Cohen, Founder and CEO of Mazuma which really sums up how digital accounting really isn't all that it is claimed to be, well worth a read.

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