Designed exclusively for Sole Traders, Clear Books Basic Accounting is a streamlined alternative to our standard subscription plans.

This simplified solution allows you to effortlessly record income and expenses, manage quarterly HMRC updates, and file your annual income tax return—without the complexity of our larger packages.

This guide explores two methods to digitally record your income and expenses within any “Clear Books Basic Accounting” plan. We advise adhering to a single method rather than switching between the two.

You can also view our video here, which helps demonstrate these bookkeeping processes too.

1. Explain imported income & expense transactions

This bookkeeping process is recommended if you have a significant number of business transactions daily or weekly, or if you use a dedicated business account. This process is only available on our paid Sole Trader/Property plans.

This bookkeeping process can be done in 3 steps: 

Step 1. Import a statement

Income and expense transactions are generated from your bank when you import a statement, and are then ready for explanation. Importing a statement can be achieved in two ways:

• By importing a statement file (Click here to view the guide on how to do this)
• By setting up a bank feed (Click here to view the guide on how to do this)

Bank feeds offer automatic retrieval of new income and expense transactions. In contrast, importing a statement file necessitates periodic repetition of the process.

Step 2. Explain income & expense transactions on imported statements

After importing a bank statement, you can start explaining your income and expense transactions that appear on it. Explaining a transaction confirms its details, which in turn builds your bank account balance in Clear Books. This balance should then match your actual bank account.

The guide below helps show you all the different ways of explaining income and expense transactions on a statement:

How to explain income and expenses on an imported statement on the MTD Income Tax plan

Step 3. Managing Invoices [optional]

You have the option of managing invoices in this bookkeeping process. The management of invoice processes are all explained in the guide here. Please note: Invoicing is not available on the Property Free plan.

2. Manual income & expense entry

This method is ideal for users with simple bookkeeping needs who do not wish to connect a bank account to Clear Books. It allows you to track your finances quickly using the Owner's Funds account, removing the need for bank reconciliation. This process is the only process we make available on our Free plans.

How it works:

• Record Income: Use the "Record income" button. Retailers may enter daily gross totals rather than itemising every sale (per HMRC guidelines).
• Record Expenses: Use the "Record expenses" button to log business costs as they occur.

Note: Because no live bank account is connected, all transactions entered this way are automatically marked as "Paid" via the Owner's Funds account.

Relevant Guides:

The "Owner’s Funds" Bank Account

Manually record income & expenses

What is the effect of bookkeeping in your account?

Regardless of the bookkeeping process chosen, your explained income and expense transactions will shape the P&L report. This is determined by the account codes assigned during the explanation of each transaction. These transactions will also generate the total income and expense amounts submitted to HMRC each quarter as part of the MTD or Income Tax rules.