Keeping Business Records


You must keep records of your business income and outgoings for your SELF ASSESSMENT RETURN
if you’re self-employed as a:

  • sole trader
  • partner in a business partnership
As a nominated partner you must keep records for the partnership itself.


Records you must keep

The records you must keep depend on whether you’re using:

Traditional accounting (accruals basis)

Records for your tax return must include:
  • a record of all your sales and takings 
  • a record of all your purchases and expenses
This might include:
  • business assets you’ve bought (eg stock, equipment)
  • value of stock and work in progress at the end of your accounting period
  • details of payments to employees (eg wages, expenses, benefits)
  • business vehicle and travel costs
  • interest from any bank or building society accounts
  • other money coming in, eg money you invest in your business
You must keep keep invoices or receipts for everything related to your business.

You’ll usually also need to keep records of both:
  • the value of your business’ assets (including cash you have)
  • what the business owes (known as ‘liabilities’)

You’ll need this at the end of the tax year, so your tax return takes account of money:
  • you’re owed but haven’t been paid yet
  • you’ve committed to spend but haven’t paid out yet (eg you’ve received an invoice but haven’t paid it yet)
 
If you’re claiming capital allowances you should keep records of the cost of equipment you buy, eg:
  • receipts
  • the cost of any equipment you sell
  • the value of any equipment you trade in or dispose of
You’ll also need a record of:
  • your business income
  • your business expenses
  • the difference between them – your business’ profit


Cash basis or simplified accounting

For your 2013 to 2014 tax return onwards, you might choose to use cash basis or simplified expenses to simplify your tax affairs. If you do, this will affect the records you keep from April 2013.
You must keep records of:
  • business income received
  • business expenses paid
Depending on what you use simplified expenses for, you need to record business miles for vehicles, hours you work at home and how many people live on your business premises over the year.
You’ll also need to keep records about your personal income to fill in your Self Assessment tax return.

You can keep your business records however you like but to fill in your tax return you’ll usually have to keep:
  • a balance sheet
  • a profit and loss account

You must make sure all your records are accurate and can be read by HM Revenue & Customs (HMRC) if they ask to see them.

How long to keep your records

If you send your tax return on or before the 31 January you must keep your records for at least 5 years and 10 months after the end of the tax year the tax return is for.

Example

If you send your 2012 to 2013 tax return online by 31 January 2014, you must keep your records until at least the end of January 2019.
If you send your tax return after the 31 January deadline, you must keep your business records for whichever of the following is longer:
  • 5 years and 10 months after the end of the tax year the tax return is for
  • 15 months after you send your tax return