How do I separate business and personal transactions efficiently?

Understanding what “registration” really changes

It’s common to assume that the date you “registered as self-employed” is the date your self-employment began. In practice, registration is an administrative step: it tells the tax authority that you’re trading and need to file returns in the right way. But the underlying question for your records is usually simpler: when did you start carrying on a trade (or business activity), and when did you actually earn the income?

Income can be earned before you complete registration for many ordinary reasons. You might have tested demand with a few paid jobs, sold items online casually that turned into a pattern, or freelanced while still deciding whether you would continue. You may even have invoiced a client and been paid before you got around to sorting the paperwork. None of that is unusual, and it doesn’t automatically mean you’ve done anything wrong. The key is to record the income accurately, match it to the correct period, and treat the “pre-registration” part as part of the start-up story of your business rather than as something separate or hidden.

In other words: you don’t record income based on when you registered. You record it based on when the income arises under the method of accounting you’re using (often “cash basis” or “accruals”), and you make sure it ends up in the tax year and return that covers your business start date. The rest of this article walks through how to do that in a practical, defensible way.

Step 1: Identify your true business start date

Before you can file or record anything, you need a clear view of when your self-employment actually started. This isn’t necessarily the first time you had an idea, bought a domain name, or sketched a logo. A business start date is usually tied to the point where you began trading: offering goods or services to customers with the intention of making a profit.

Ask yourself a few concrete questions:

1) When did you first advertise, list services, or actively seek paying customers?

2) When did you first agree work with a client (even if you delivered later)?

3) When did you first deliver a product or service for money?

4) When did you first issue an invoice, take a booking, or accept a payment?

If you can anchor your start date to evidence—emails with clients, a first invoice, a booking confirmation, a marketplace sale record—that makes the story straightforward. The earliest credible “trading” activity is usually the best starting point. If you had occasional one-offs long before you seriously started, you may need to think about whether those were genuinely part of a trade or were isolated casual income. But if you’re reading this because you earned income before registering, it’s often because you were already trading and the registration came later.

Once you’ve identified your start date, the rest of the process becomes: record income and expenses from that date onwards, using a consistent accounting method, and include them in the correct tax return for the tax year(s) that cover those transactions.

Step 2: Decide whether you’re using cash basis or accruals

How you “record” income depends on whether you record it when you receive it or when you earn it. Many self-employed people use cash basis because it’s simpler: you record income when it hits your bank (or when you receive cash), and you record expenses when you pay them. Under accruals (sometimes called traditional or “invoice” accounting), you record income when you’ve earned it (typically when you invoice or deliver), and you record expenses when they’re incurred, even if the money moves later.

This choice matters a lot for income earned before registration because it affects which period the income belongs to. For example, if you did work in March, invoiced in April, and got paid in May, cash basis would usually put the income in May; accruals would often put it in March/April depending on when it was earned and invoiced. Both methods have rules and may be subject to thresholds and eligibility criteria in your jurisdiction, but as a practical bookkeeping matter you need to pick a method and stick to it consistently.

If you’re already keeping simple records and you mainly care about what came in and what went out, cash basis is often the easiest. If you issue invoices, have ongoing work in progress, hold stock, or need a clearer picture of profitability by period, accruals may be more appropriate. Whichever you use, the principle stays the same: the registration date doesn’t control the accounting date.

Step 3: Categorise the “before registration” money: is it business income?

Not every payment you receive before registering is necessarily self-employment trading income, but most will be if it came from the same activity you now treat as your business. The safest approach is to assess what the money was for, and whether it fits the pattern of your self-employment.

Common examples of pre-registration receipts that are usually business income include:

• Payment for freelance services you delivered (design, consulting, tutoring, coding, cleaning, etc.).

• Marketplace or e-commerce sales that you made with an intention to profit (especially repeated or organised selling).

• Deposits taken for bookings you later fulfilled (photography sessions, events, trades work).

• Royalties or commissions earned from content or affiliate activity you were actively building as a business.

Examples that might not be business income (depending on your local rules and facts) include selling personal items occasionally at a loss, gifts from family, reimbursements that weren’t payment for your work, or compensation unrelated to trading.

If you’re unsure, focus on the underlying activity: was it part of the business you now run, and did you intend to make a profit? If yes, it’s typically appropriate to record it as business income, even if you hadn’t registered yet.

Step 4: Create a clean timeline and gather evidence

This is the part that saves you pain later. Build a timeline from your earliest trading activity through to the date you registered and beyond. You don’t need a novel—just a clear list of transactions with supporting records.

For each item of pre-registration income, capture:

• Date received (or date earned/invoiced if using accruals).

• Customer name (or marketplace identifier).

• Description of the work/product.

• Gross amount and any fees withheld (platform fees, payment processor fees).

• Evidence: bank statement line, PayPal/Stripe receipt, invoice, email confirmation, marketplace order record.

Do the same for pre-registration expenses that relate to the business (more on those shortly). Then, keep everything in one place—a spreadsheet, accounting software, or even a folder system—so that when you come to file, you’re not trying to reconstruct your life from memory.

A good rule is: if you can show where the number came from and why it’s business-related, you can record it confidently.

How to record the income in your bookkeeping system

Once you’ve decided the income is business income and you’ve chosen your accounting method, recording it is straightforward. The trick is to record it in a way that makes the timing clear and keeps the audit trail intact.

Option A: You use a spreadsheet

If you use a spreadsheet, create an “Income” tab with columns such as:

• Date received (cash basis) or date earned/invoiced (accruals)

• Invoice/Order ID

• Customer

• Description

• Gross amount

• Fees (if applicable)

• Net received

• Payment method (bank transfer, card, cash, PayPal)

• Notes / evidence link (file name of receipt, email subject, etc.)

Then enter your pre-registration income just like any other income, using the correct date based on your method. If you want extra clarity, you can add a “Pre-registration?” column with a simple Yes/No. That column is for your comfort and review; it doesn’t change the tax treatment, but it helps you double-check that everything has been included.

Option B: You use accounting software

If you use accounting software, you usually add the transactions with the correct dates and categories. Many packages let you set a “start date” for the business, but even if your software doesn’t, you can still record historical transactions. The important points are:

• Use the correct transaction date.

• Categorise it as sales/income (and fees as expenses, if separated).

• Attach evidence where possible (PDF invoice, receipt, screenshot of marketplace order).

• Reconcile to bank statements so the totals tie out.

If your software has a “sales invoice” feature and you are using accruals, you may enter invoices on the date they were issued (or when work was completed, depending on how you recognise revenue), then match payments later. If you’re on cash basis, you may simply record the payment receipt and skip invoices for bookkeeping purposes—though you may still issue invoices to customers as a commercial record.

Option C: You have mixed payments: cash, bank, and platforms

Pre-registration income often comes in through multiple channels. You might have been paid via bank transfer, cash, PayPal, Stripe, or an online platform that deducts fees before paying you. Record gross sales as income, and record fees separately as expenses if that reflects your records and helps you understand profitability.

For example:

• Customer pays £200 via an online platform, platform takes £20 fee, you receive £180.

You can record:

• Income: £200

• Expense (fees): £20

• Net deposit: £180

This makes your turnover and costs transparent. Alternatively, you may record net receipts as income if your system is set up that way, but be consistent and able to explain it. Many people prefer gross-plus-fees because it matches platform statements and avoids understating turnover.

What about expenses you incurred before you registered?

People often focus on the income and forget the other half: expenses. If you were trading before you registered, you probably had costs before you registered too—software subscriptions, equipment, marketing, materials, travel, professional fees, and so on.

In many situations, legitimate business expenses incurred before you officially registered can still be recorded as business expenses, as long as they relate to the business and fall within the allowable rules. The exact rules vary by jurisdiction, but the practical bookkeeping approach is:

• Identify the expense.

• Confirm it was for the purpose of the business activity you’re now running.

• Record it with the correct date paid (cash basis) or date incurred (accruals).

• Keep the evidence (receipt, invoice, bank statement).

This matters because your taxable profit is income minus allowable expenses. If you leave pre-registration expenses out, you may overstate profit and pay more tax than necessary.

Start-up costs versus ongoing costs

Some pre-registration expenses are start-up costs—things you bought or paid for to get going. Others are simply early running costs. It can help to group them, even if the tax treatment ends up similar, because it tells a coherent story.

Examples of start-up costs might include:

• Setting up a website, domain, or branding.

• Tools or equipment needed to deliver your service.

• Initial stock or materials to begin selling.

• Training directly linked to your new trade (where allowable).

Examples of running costs might include:

• Ongoing software subscriptions.

• Advertising spend.

• Postage and packaging.

• Payment processor fees.

Keep in mind that some items (especially equipment) may need to be treated differently from day-to-day expenses—some systems treat them as assets rather than immediate costs. That doesn’t stop you recording them; it just affects which category they go to and how you calculate profit for tax.

How to handle invoices and payments that straddle your registration date

A frequent source of confusion is a transaction that crosses the registration date. For example, you did the work before registering but got paid after registering, or you took a deposit before registering and finished the job after registering. Here’s how to think about it.

If you use cash basis

Under cash basis, you generally record income when you receive payment. So if you got paid after registration, the income is recorded when you received it, even if the work happened earlier. But that does not mean the income “belongs” to being registered; it’s simply about timing. Your pre-registration trading activity may still mean you should treat the business as having started earlier, but cash basis will often pull the income into the later period.

Deposits are usually recorded when received under cash basis. If you take a deposit before registration, record it on that date as income received. If you later refund it, record the refund when it happens. If you later complete the work, you don’t record the same money again; you only record additional payments as they arrive.

If you use accruals

Under accruals, you try to record income when it’s earned. If you completed the work before registration and invoiced before registration, the income typically belongs to that earlier period, even if payment arrives later. If you invoice after registration for work done before registration, you may still treat the income as earned when the work was delivered—depending on your accounting policies and local rules. The point is to be consistent and able to explain the basis you used.

Deposits under accruals can be treated as advance payments or deferred income until the service is delivered, again depending on rules and materiality. If you’re small and keeping simple records, you may handle it pragmatically, but you should avoid double-counting.

Will recording pre-registration income cause penalties?

People worry that once they “admit” they earned money before registering, they’ll automatically be penalised. In reality, what usually matters is whether you notify and report within required deadlines and whether you pay what’s due. If you are late to register when you should have registered, there can be penalties in some jurisdictions, but accurate reporting and good records generally help, not hurt.

From a practical standpoint, the cleanest approach is to include all business income from the true start date and to make sure you file the appropriate return(s). If your pre-registration income falls into an earlier tax year, you may need to file for that year too, or amend a return if you already filed something else. If everything falls into the same tax year, it may simply be included on the next return you file.

If you suspect you have missed a legal registration deadline, it’s often worth speaking to a tax professional. But bookkeeping-wise, you should still record the income correctly. The tax authority is much more likely to take issue with missing or concealed income than with income that you correctly report with a clear explanation of when you started.

How to present the “pre-registration” period in your tax return

Most self-employment tax reporting systems ask for a business start date and then income/expenses for the period that falls within the tax year. If you started trading before you registered, your business start date should reflect the actual start of trading rather than the date you filled in a form. Then you report the income and expenses that fall within the relevant tax year.

Here are the two most common scenarios:

Scenario 1: Pre-registration income is in the same tax year

If you earned money in the same tax year that you later registered, you typically include it in that year’s self-employment figures. The main task is simply to make sure it’s captured in your totals and supported by records. Your bookkeeping will already show the dates and amounts; your return will summarise them.

Scenario 2: Pre-registration income is in an earlier tax year

If the income was earned in a prior tax year, you may need to report it in that earlier year. That might mean filing a return for that year or amending one, depending on your situation and local rules. This is where dates really matter. A couple of payments that happened just before a tax year ended can change which return the income belongs to.

Bookkeeping still looks the same: you record the transaction on the correct date. The reporting step is where you allocate it to the correct year.

Practical examples of recording pre-registration income

Examples make this feel less abstract. Below are a few common situations and how the recording typically works.

Example 1: Freelance work paid before registration

You designed a logo for a client on 10 February. The client paid you £300 on 15 February. You registered as self-employed on 20 April.

If you use cash basis, record £300 income on 15 February. If you use accruals and you consider the work earned on completion, record the income on 10 February (or invoice date if you invoiced then). Either way, it is business income related to your trade, even though registration was later.

Example 2: Invoice raised before registration, paid after registration

You completed consulting work on 28 March, invoiced £1,000 on 30 March, registered on 10 April, and got paid on 30 April.

Cash basis: record £1,000 income on 30 April when paid. Accruals: record income on 30 March (or 28 March depending on your policy) and record an accounts receivable until payment arrives. The registration date doesn’t alter the accounting; it may affect administrative deadlines, but not the substance of the transaction.

Example 3: Deposit before registration, balance after registration

You took a £200 deposit on 5 January for a job you completed on 5 February, and you received the remaining £800 on 7 February. You registered on 1 March.

Cash basis: record £200 on 5 January and £800 on 7 February as income received. Accruals: you might treat the £200 as a liability (money received in advance) until the job is completed, then recognise the full £1,000 when delivered. For a small business, you may keep it simpler, but ensure you don’t double count and that your method is consistent.

Example 4: Online platform sales with withheld fees

You sold items on a platform in December. The platform statement shows £600 gross sales, £60 fees, and £540 paid out. You registered in February.

Record £600 as income and £60 as fees (expense), with the dates based on your accounting method and platform payout timing. Keep the platform statement as evidence. This creates a clear trail that matches what the platform reports and what you received.

How to explain pre-registration income if someone asks

Sometimes the concern isn’t just recording—it’s being able to explain it if a tax authority, accountant, or lender asks why income appears before your “registration” date. The explanation is simple and legitimate:

You started trading on X date, you later completed registration on Y date, and you have records of income and expenses from the time you began trading. Registration is an administrative notification; it doesn’t change when the work was done or when you were paid.

That’s it. Keeping a short note in your records can help. For example, in a spreadsheet “Notes” column you might write: “Trading began (first client work) on 10 Feb; registration completed 20 Apr.” You don’t need to dramatise it—just document the timeline.

Bank accounts: what if you used a personal account before registering?

Many people start out using a personal bank account because they don’t yet have a business account. This is common, especially during the first few months. It doesn’t prevent you from recording income properly, but it does mean you need to be careful with traceability.

Here are practical steps:

• Export bank statements for the relevant period and highlight business-related transactions.

• Keep references on transfers where possible (customer name, invoice number).

• Avoid mixing in too much personal spending if you can; if you must, keep your bookkeeping clean with clear categories.

• If you later open a business account, record transfers between accounts as transfers, not income, to avoid double counting.

The goal is that someone could follow the money from the customer to your account and see how it was recorded in your books.

What if you didn’t keep receipts or invoices at the time?

If you’re reconstructing records after the fact, don’t panic—just be systematic. Start with what you can reliably prove: bank statements, payment processor history, platform reports, email trails, calendar bookings, or messages confirming work and payment.

Then:

• Recreate invoices (marked clearly as “reissued for record-keeping” if needed) based on actual work done and agreed amounts.

• Save screenshots or PDFs of platform transactions.

• Write brief notes for each transaction explaining what it was for.

• For expenses without receipts, use alternative evidence where allowed (bank statement line plus explanation), but recognise that some jurisdictions require receipts for certain claims.

The main risk in retroactive bookkeeping is guessing. Avoid estimates where you can. If you must estimate (for example, mileage), document the basis of your estimate and be conservative.

Common mistakes to avoid

When dealing with pre-registration income, a few mistakes show up repeatedly. Avoiding them keeps your records clean and reduces the chance of problems later.

Mistake 1: Treating the registration date as the start of income

This is the big one. If you started trading before you registered, your books should reflect that trading started earlier. Otherwise you may omit income (and expenses) from the correct period.

Mistake 2: Double-counting deposits or platform payouts

Deposits can be counted twice if you record the deposit as income and later record the full invoice as income without backing out the deposit. Platform payouts can be double-counted if you record gross sales and then also record the net payout as separate income. Use one consistent structure so each pound/dollar is counted once.

Mistake 3: Ignoring fees and refunds

Payment processor fees, platform fees, chargebacks, and refunds are part of doing business. If you ignore them, your records won’t reconcile to cash and your profit will look wrong.

Mistake 4: Forgetting pre-registration expenses

People often forget that the months before registration can include meaningful costs. Record them properly. Even small subscriptions and advertising spend add up.

Mistake 5: Using unclear descriptions

“Payment” isn’t a helpful description. “Logo design for Client A, Invoice 001” is. Clear descriptions make your bookkeeping understandable to you later and defensible to anyone else.

When it’s worth getting professional help

You can record pre-registration income yourself, but there are situations where professional advice is worth it because the complexity isn’t just bookkeeping—it’s the tax treatment or compliance implications. Consider getting help if:

• The pre-registration income spans multiple tax years.

• You are unsure whether the activity counts as a trade or something else.

• You have significant expenses for equipment, stock, or a home office and want to claim correctly.

• You think you missed a registration deadline and want to minimise penalties.

• You have multiple income streams (employment plus self-employment, rental income, overseas clients) and want to get the bigger picture right.

Even if you hire someone, you’ll still benefit from doing the timeline and document gathering first; it reduces the time (and cost) of professional work and helps ensure accuracy.

A simple checklist you can follow today

If you want a practical action plan, here’s a simple sequence that works for most people:

1) Determine your true trading start date (earliest evidence of trading activity).

2) Choose an accounting method for your records (cash basis or accruals) and apply it consistently.

3) Gather evidence for all pre-registration income and expenses (statements, invoices, emails, platform reports).

4) Enter the transactions into your spreadsheet or accounting software using the correct dates and categories.

5) Separate gross income and fees where helpful, and ensure deposits/refunds aren’t double-counted.

6) Reconcile your records to what actually hit your bank accounts to catch omissions.

7) When filing your tax return, use the actual start date of trading and report the totals for the correct tax year(s).

8) Keep a short note explaining the timeline: “Trading began on X; registration completed on Y.”

Final thoughts: pre-registration income is normal—record it cleanly

Earning money before you registered as self-employed is a normal part of how many businesses start. The important thing is not to treat that period as a grey zone. If the income came from the trade you now run, record it as business income. Use the correct dates based on your accounting method, keep the evidence, and make sure it lands in the correct reporting period.

When your records tell a simple, consistent story—when you started trading, what you earned, what you spent, and how it all ties back to real payments—everything else becomes easier. Registration is a step you take; trading is what you do. Your bookkeeping should reflect the trading.