Last reviewed: 8 August 2026
Quick summary
- For cash-basis records, HMRC says all payments count: cash, card, cheque, payment in kind and other methods.
- Record a day or shift's gross takings first. A card-processor bank deposit is usually net of fees and can include tips or delayed refunds.
- Do not apply this guide blindly to employment tips. An employed worker's direct tips, employer distribution and tronc arrangements have separate tax routes.
Part of Side-hustle tax guides.
Direct answer
A self-employed person's record should explain the whole amount earned, not just the amount paid into their bank. Keep a daily or shift record of gross services or sales, cash received, card takings, cash tips, card tips, refunds and discounts. Then retain the card-terminal or payment-link report that explains why the processor paid a smaller net amount into the bank.
HMRC's current cash-basis guidance says all payments count, including cash, card, cheque, payment in kind and any other method. HMRC's self-employed record guidance also calls for accurate records of all sales and income, business expenses and supporting proof. A notebook, spreadsheet or software can work if it produces a reliable trail from the customer payment to the bank, cash kept or cash banked.
There is an important boundary. A hairdresser renting a chair, mobile nail technician, market-food trader or independent tutor is not in the same position as an employee receiving tips through an employer. GOV.UK has separate guidance on employment tips and troncs. Keep the actual contract and payment route available for an accountant where you have both employed shifts and separate self-employed work.
The five-line daily close
Complete this at the end of the day or shift, while the terminal totals and cash float are still visible. It is more useful than reconstructing a month from deposits.
- Gross work completed: total services or sales before payment method. Use appointment software, till report, job sheet or numbered invoices as the starting point.
- Cash received: sales paid in notes and coins, plus separately recorded cash tips. Note cash used to make change and cash paid into the bank later.
- Card and payment-link receipts: total card sales and card tips from the terminal, Stripe, SumUp, Square or booking platform report. Keep card tips as their own column.
- Adjustments: refunds, discounts, no-shows, gift-card redemptions and chargebacks should be listed, not quietly netted off without explanation.
- Settlement bridge: merchant gross receipts less stated processing fees and refunds equals the settlement expected. Match that settlement to the bank date and reference, allowing for timing differences.
Keep personal cash withdrawals out of the takings calculation. Record the business cash first, then show what was banked, retained for float or taken for personal use. That distinction stops a perfectly legitimate cash deposit looking unexplained later.
Three cash-and-tip patterns
- Chair-renting barber: the booking app shows 18 cuts, the card terminal includes service prices plus customer tips, and three clients pay cash. The barber retains the appointment total, terminal report, cash-log total and card settlement. The cash tip is not hidden inside a general cash number.
- Mobile beauty therapist: an evening of treatments is paid through bank transfer, cash and a payment link. One client tips by card and another cancels after paying a deposit. The daily sheet identifies the treatment income, tip, deposit/refund position and processor fee so the eventual bank movements make sense.
- Street-food sole trader: a till Z-report gives gross cash and card takings, while the card provider settles two days later after fees. The trader keeps the Z-report, cash-bank slip, card settlement and supplier receipts. A deposit into the bank is evidence, but not the full sales record.
These examples are not instructions to use a particular accounting method. They show the evidence that makes the method you use explainable.
Records to keep
- Daily takings, till Z-reports, appointment or job logs, and numbered sales invoices where used.
- Cash sales and cash tips in separate columns, including cash banked and the date of the bank deposit.
- Card-terminal, payment-link and booking-platform reports that show gross payments, tips, fees, refunds and settlements.
- Bank statements and cash-bank slips that match each settlement or cash deposit.
- Refund, chargeback, discount and deposit evidence, with enough detail to explain a negative or reduced settlement.
- Receipts for business expenses and a separate note for personal cash taken from the business.
- Employment payslips or tronc statements in a separate folder if you also work employed shifts.
HMRC says records need to identify business transactions and must be kept as evidence. That is why a cash notebook without dates, a terminal report without the linked bank deposit, or a bank deposit without the day's sales evidence is incomplete on its own.
Common mistakes
Do not code a net card settlement as the whole day's sales and lose the processing fee. Do not put all cash in one column if some is a cash tip and some is a service sale. Do not ignore refunds because the card provider deducts them automatically later. Do not treat cash kept for a personal withdrawal as though the money was never received by the business.
Equally, do not assume the tax treatment of direct tips received as an employee is the same as self-employed business takings. If an employer, tronc or staff distribution is involved, retain that evidence and ask how the actual arrangement is treated.
Questions to take to an accountant
- Does my actual status make these self-employed takings, employment tips, or a mixture that needs separate records?
- Should card tips be shown as a separate income category in my software or daily takings sheet?
- How should I reconcile card fees, refunds, deposits and late settlements without understating gross sales?
- What proof is sufficient for cash received, cash banked and cash retained for a float?
- Do my turnover and payment routes raise VAT or Making Tax Digital recordkeeping questions?
Useful related guides
Key takeaway
Cash, card payments and tips are easier to manage when you record the gross day first and the bank settlement second. A five-line daily close gives an accountant the evidence to separate takings, tips, fees, refunds and personal drawings without guesswork.
Sources checked on 8 August 2026
Frequently asked questions
Do self-employed workers need to record cash tips?
Keep a complete record of business takings, including cash and card money. HMRC's cash-basis guidance says all payments count, including cash, card, cheque and payment in kind.
Are card tips the same as card sales in the records?
Keep them distinguishable in the daily close. The processor deposit may combine sales, tips, fees and later refunds, so retain the merchant report alongside the bank receipt.
Does this apply to employees too?
Not in the same way. Employment tips may be dealt with through the employer or tronc arrangements, and direct tips have separate HMRC guidance. Keep employment and self-employed activity separate.