13 Bookkeeping Tips for Self-Employed Canadians (2026)

If you are self-employed in Canada, bookkeeping is your responsibility. No employer is withholding taxes, tracking expenses, or filing remittances for you. Every dollar you earn, every receipt you collect, and every deduction you claim is on you.

The good news: self-employed bookkeeping does not need to be complicated. These 13 tips cover the fundamentals that keep your books clean, your taxes accurate, and the CRA off your back.

1. Open a Separate Business Bank Account

This is the single most important bookkeeping decision you will make. Open a dedicated bank account for your business income and expenses. Do not run business transactions through your personal account.

A separate account gives you three advantages:

• Clean records. Every transaction in your business account is a business transaction. No sorting through personal groceries and Netflix charges to find deductions.
• Easier reconciliation. Your bank statement becomes a complete record of business activity. Monthly reconciliation takes minutes instead of hours.
• CRA audit protection. If the CRA audits you, a dedicated business account shows clear separation between personal and business finances. Commingled accounts raise red flags and make audits longer and more painful.

You do not need a commercial business account. Most Canadian banks offer no-fee or low-fee accounts that work fine for sole proprietors. Open one today and route all business income and expenses through it.

If you do gig work across multiple platforms, a single business account still works. Tag transactions by platform for easy reconciliation. See our bookkeeping guide for gig workers for the full workflow.

2. Track Every Receipt from Day One

The CRA requires you to keep supporting documentation for every business expense you claim. That means receipts. No receipt, no deduction — it is that simple.

Start tracking receipts the day you start earning self-employment income. Do not wait until you "get organized" or "have more revenue." The habits you build early carry forward, and the receipts you lose early are gone forever.

Here is what to capture for each receipt:

Thermal paper receipts fade within months. Photograph or scan them immediately. Digital copies are accepted by the CRA as long as they are legible and complete. AI bookkeeping tools can extract all of this data from a photo in seconds — see our AI bookkeeping guide for how that works.

3. Set Aside 25-30% for Taxes

As a self-employed Canadian, nobody withholds taxes from your payments. If you spend everything you earn, you will owe a large tax bill in April with no money to pay it.

The fix is simple: every time you receive a payment, transfer 25-30% to a separate savings account dedicated to taxes. Do not touch this money until tax time.

Here is what that 25-30% covers:

The exact percentage depends on your province, total income, and deductions. But 25-30% is a safe baseline that prevents surprises. If you consistently earn above $100,000, set aside 35%.

4. Keep a Mileage Logbook

If you use a personal vehicle for business, you must track your kilometres. The CRA requires a logbook that records the date, destination, distance, and purpose of every business trip. Without it, your entire vehicle deduction can be denied on audit.

Your mileage log determines your business-use percentage:

Business-Use % = Business Kilometres / Total Kilometres

That percentage is applied to all vehicle expenses — fuel, insurance, maintenance, lease payments, and loan interest. A driver who logs 30,000 km total and 20,000 km for business has a 66.7% business-use percentage.

Keep your logbook consistently. The CRA does not accept estimates or reconstructed logs. A simple notebook in your vehicle works, or use a mileage tracking app that logs trips via GPS.

For ride-share and delivery drivers, mileage is typically your largest deduction. Our Uber driver tax deductions guide breaks down exactly how to calculate and claim vehicle expenses.

5. Learn Your T2125 Categories

Every self-employed Canadian reports business income and expenses on CRA Form T2125. Understanding the form's expense categories helps you categorize expenses correctly throughout the year — not just at filing time.

The most common mistake is putting vehicle expenses in Part 7 instead of Part 9, creating a double deduction that the CRA will flag. Know where each expense category goes before you start filing.

Our T2125 step-by-step guide walks through every section with line numbers and examples.

6. File GST/HST on Time

If your gross revenue exceeds $30,000 over four consecutive calendar quarters, you must register for GST/HST. Once registered, you collect tax on your services and remit it to the CRA on a set schedule.

Filing deadlines depend on your reporting period:

Late filing triggers penalties: 1% of the balance owing plus 0.25% for each month late, up to 12 months. Late remittance triggers interest at the CRA prescribed rate.

Even if your revenue is below $30,000, voluntary registration can be worthwhile. It lets you claim Input Tax Credits (ITCs) on business expenses, recovering the GST/HST you pay on supplies, equipment, and services. For the full breakdown, see our GST/HST filing guide.

7. Use the Simplified Method for Home Office

If you work from home, you can deduct a portion of your housing costs. The CRA offers two methods: the detailed method and the simplified (flat rate) method.

The detailed method requires tracking rent or mortgage interest, property taxes, utilities, home insurance, and maintenance — then applying your business-use percentage. It yields a larger deduction if your office is a significant portion of your home.

The simplified method requires no receipts and no calculations. Claim $2 for each day you worked from home, up to $500. For most self-employed Canadians working from a corner of their living room, this method saves time with a reasonable deduction.

Choose the method that gives you the larger deduction for less effort. If your dedicated office is 15% of your home and your annual housing costs are $24,000, the detailed method gives you $3,600 — far more than the $500 flat rate cap.

8. Reconcile Monthly, Not at Tax Time

Reconciliation means comparing your bookkeeping records against your bank and credit card statements to make sure every transaction is accounted for and categorized correctly.

Do this monthly. Not quarterly. Not at tax time. Monthly.

Here is why monthly reconciliation matters:

• Catch errors early. A miscategorized expense is easy to fix in January. Finding it in April while doing your taxes is stressful and time-consuming.
• Spot missing receipts. If your bank statement shows a $200 charge at Staples but you have no receipt, you have time to find it or request a duplicate.
• Detect fraud. Unauthorized charges on your business account are easier to dispute within 30 days than 6 months later.
• Stay CRA-ready. If the CRA sends a review letter, you can respond quickly with organized, current records.

A monthly reconciliation takes 15-30 minutes if your books are current. It takes hours if you wait until year-end.

9. Back Up Your Records Digitally

The CRA requires you to keep business records for six years. Paper receipts fade, get lost, and take up space. Digital backups solve all three problems.

Your backup strategy should include:

• Receipt images. Photograph every receipt immediately. Store in cloud storage or a bookkeeping tool with built-in storage.
• Bank statements. Download monthly PDF statements. Do not rely on online banking history — banks can change access at any time.
• Tax returns and notices. Keep copies of every T1, T2125, GST/HST return, and CRA notice of assessment.
• Mileage logs. Back up your logbook entries digitally, whether you use an app or a physical notebook that you photograph.

Follow the 3-2-1 rule: three copies of your data, on two different media types, with one copy offsite.

10. Understand CCA (Capital Cost Allowance)

When you buy expensive equipment, vehicles, or computers for your business, you generally cannot deduct the full cost in the year of purchase. Instead, you claim Capital Cost Allowance (CCA) — the CRA's depreciation system — which spreads the deduction over multiple years.

Common CCA classes for self-employed Canadians:

CCA is optional in any given year. If your income is low, skip CCA and carry the unused deduction forward to a higher-income year.

The first-year rule limits your CCA claim to 50% of the normal rate in the acquisition year (the Accelerated Investment Incentive Program modifies this for certain assets — check current CRA rules).

CCA is one of the most commonly missed deductions. If you bought a laptop, a vehicle, or office furniture for your business, claim it. Our T2125 guide covers Part 8 (CCA) in detail.

11. Automate with AI Bookkeeping Tools

Manual bookkeeping — entering receipts into spreadsheets, categorizing expenses by hand, separating taxes — is the work that most self-employed Canadians either dread or skip entirely. AI bookkeeping tools eliminate the manual labour.

Here is what AI bookkeeping handles automatically:

A freelancer with 50 receipts per month spends 3-4 hours on manual data entry alone. AI reduces that to the time it takes to photograph the receipts.

AI does not replace professional judgment — you still need an accountant for tax strategy. But it eliminates the repetitive data entry that consumes most bookkeeping time. For a complete breakdown, see our AI bookkeeping guide.

12. Review Last Year's Return Before Filing

Before you file your current tax return, pull up last year's T1 and T2125. Review them line by line. This catches three common problems:

Missed deductions. If you claimed home office last year but forgot this year, the side-by-side comparison surfaces it immediately. Same for CCA, professional dues, insurance, and any recurring deduction.

Category consistency. If you categorized your phone bill as Line 9281 (telephone) last year but accidentally put it under Line 8760 (office expenses) this year, the comparison catches it. Inconsistent categorization across years draws CRA attention.

Income completeness. Compare your reported income against platform summaries, bank deposits, and any T4A slips. Missing income is the fastest way to trigger a CRA reassessment.

Spend 15 minutes comparing returns before filing. It is the cheapest quality check available.

13. Hire an Accountant for Strategy, Not Data Entry

Many self-employed Canadians either avoid accountants entirely (too expensive) or hand them a shoebox of receipts in April (expensive and inefficient).

Keep your own books throughout the year. Then hire an accountant for work that requires professional expertise:

When your books are organized, your accountant spends less time on data entry and more time on strategy — saving you money on fees and potentially saving thousands in optimized deductions and tax planning.

A good accountant pays for themselves. The key is giving them clean, organized records so they can focus on the high-value work.

Summary: The Complete Bookkeeping Checklist

Frequently Asked Questions

How many hours per week does self-employed bookkeeping take?

With a consistent system, self-employed bookkeeping takes 15-30 minutes per week for receipt scanning and expense logging, plus 30-60 minutes for monthly reconciliation. The total is roughly 2-3 hours per month — far less than the 8-12 hours many self-employed Canadians spend scrambling at tax time with no system. AI bookkeeping tools reduce this further by automating receipt scanning and categorization.

What is the penalty for not keeping proper books?

The CRA can deny deductions you cannot support with documentation. If audited, expenses without receipts are disallowed, increasing your taxable income. In severe cases, CRA imposes penalties of $100 per failure plus gross negligence penalties of 50% of the additional tax owing. The real cost is usually the denied deductions: a self-employed Canadian claiming $15,000 in unsupported expenses could face $4,000-$6,000 in additional tax and interest.

Should I use cash or accrual accounting?

Most self-employed Canadians use cash-basis accounting, which records income when received and expenses when paid. It is simpler and matches how sole proprietors experience cash flow. Accrual accounting — recording income when earned and expenses when incurred — is required for businesses with inventory over $1 million or those that are incorporated. If you are a freelancer, consultant, or gig worker operating as a sole proprietor, cash-basis is almost certainly the right choice.

When should I start keeping books for a new side business?

From the first dollar. The moment you earn income or incur an expense related to a business activity, start tracking it. If the business grows, you have complete records from inception. If the CRA reclassifies your hobby as a business (which they can do based on profit intent and activity patterns), you have documentation to support your deductions. There is no downside to starting early and a significant downside to starting late.