Deciding on the Accounting Period
The accounting period is the period of trade for which you calculate your profits or losses. You should decide on your accounting period when you first start your business.
Most businesses choose accounting periods that end on 31 December each year. You may also choose accounting periods that end on a date other than 31 December.
For example, if your business commences on 1 April 2007, and you choose your accounting period to end on 31 December every year, relevant accounting periods and the respective Years of Assessment will be:
| 1st Accounting Period |
01 Apr 2007 to 31 Dec 2007 |
Year of Assessment 2008 |
| 2nd Accounting Period |
01 Jan 2008 to 31 Dec 2008 |
Year of Assessment 2009 |
| 3rd Accounting Period |
01 Jan 2009 to 31 Dec 2009 |
Year of Assessment 2010 |
However, if you choose to prepare your accounts to a date other than 31 December, for example, 31 March, then the relevant accounting periods and the respective Years of Assessment will be:
| 1st Accounting Period |
01 Apr 2007 to 31 Mar 2008 |
Year of Assessment 2009 |
| 2nd Accounting Period |
01 Apr 2008 to 31 Mar 2009 |
Year of Assessment 2010 |
| 3rd Accounting Period |
01 Apr 2009 to 31 Mar 2010 |
Year of Assessment 2011 |
Keep Proper Records and Accounts
As a self-employed person, you have to keep proper records and accounts of your business transactions. This is so that your income earned and business expenses claimed can be readily ascertained. You must be able to support your records and accounts with invoices, receipts, vouchers, and other supporting documents.
Estimates and improper records are not acceptable.
Records to verify income and claims for deduction include:
- For Sales: cash register tape, daily sales record book, invoices
- For expenses: receipts, daily purchases record book
However, you need not forward these records unless we ask for them.
Prepare Statement of Accounts
The statement of accounts is made up of:
- Trading and Profit and Loss Accounts
- Balance Sheet
You have to prepare the statement of accounts of your business at the end of every accounting period.
If you need help in preparing the statement of accounts, please refer to starter guide for the self-employed. You may wish to engage an accounting professional to prepare the statement of accounts for you.
Working Sheets
For your general reference, we have provided sample working sheets to prepare the statement of profit and loss. If you are a taxi driver (25KB), commission agent (35KB), or you are engaged in general trade (25KB), you may use the working sheets as a guide.
For a guide on how a balance sheet may be presented, please refer to the sample format of balance sheet.
Prepare a 4-line statement
From your statement of accounts, you have to extract the relevant figures and prepare a 4-line statement summary as follows:
| First line: |
Revenue |
| Second line: |
Gross Profit |
| Third line: |
Allowable Business Expenses |
| Fourth line: |
Adjusted Profit |
File Income Tax
An individual income tax return (Form B or B1) will be sent to you at the beginning of the next year, usually before 15 March, for you to report your income from business as well as your income from all other sources.
Find out more on how to file your tax return.
Starter Guide for the Self-Employed
In addition, you may refer to the following guide for a comprehensive write-up on what a self-employed person needs to know.
Starter Guide for the Self-Employed (English) (215KB)
Statement of Accounts (English) (41KB)
Schedules (English) (36KB)
Starter Guide for the Self-Employed (Chinese) (296KB)
Statement of Accounts (Chinese) (46KB)
Schedules (Chinese) (46KB)
Starter Guide for the Self-Employed (Malay) (200KB)
Statement of Accounts (Malay) (97KB)
Schedules (Malay) (106KB)
Starter Guide for the Self-Employed (Tamil) (226KB)
Statement of Accounts (Tamil) (254KB)
Schedules (Tamil) (200KB)
This guide covers the tax obligations of the self-employed, keeping proper records and accounts, filing of income tax returns, information on Medisave contributions and offences and penalties.
If you are a hawker, you may refer to the Tax Guide for Hawkers, which are available in 4 languages.
FAQs
You do not have to inform IRAS immediately after you registered or started your business. An income tax return (Form B or B1) will be sent to you at the beginning of the next year, usually before 15 March, for you to report your income.
However, if you do not receive the income tax return by 15 March, you may download the Registration Form for New Individual Taxpayer (51KB) complete it and send it to us by fax or mail. We will create a record and post the income tax form to you.
Your income is taxed in the year following the year the income is earned. For example, your income earned in the year 2009 will be taxed in the year 2010.
The year 2009 is known as the basis year and the year 2010 is known as the Year of Assessment.