Records are rarely the most exciting part of running a business, but they are the part that protects you when a question comes up months or years later. HMRC publishes clear guidance for people who are self-employed. This guide turns it into a checklist you can work through in an afternoon.
Who this applies to
HMRC says sole traders and partners in a business partnership must keep business records. A nominated partner must also keep the partnership's records, and sole traders and partners must keep records of their personal income too. HMRC notes that there are different rules for limited companies, so if you trade through a company, check the separate guidance on GOV.UK rather than relying on this article.
What to keep
HMRC's list of records for the self-employed is short and practical:
- all sales and income;
- all business expenses;
- VAT records, if you are VAT-registered;
- PAYE records, if you employ people; and
- records of your personal income.
If you use traditional accounting rather than recording money when it is received or paid, HMRC lists some extra items: amounts owed to you but not yet received, amounts you have committed to pay but have not yet paid, the value of stock and work in progress at the end of the period, year-end bank balances, the amount you invested in the business during the year, and the amount you took out for your own use.
What counts as a record
HMRC gives examples of the kind of proof it has in mind: receipts for goods and stock, bank statements, chequebook stubs, sales invoices, till rolls and bank slips. The practical lesson is that a number in a spreadsheet is not enough on its own. Keep the document that supports it, whether that is a paper receipt in a folder or a clear scan stored somewhere safe.
How long to keep them
HMRC's guidance is to keep your records for at least five years after the 31 January submission deadline for the relevant tax year. Its own example makes this concrete: if you filed your 2022 to 2023 tax return by the 31 January 2024 deadline, you should keep the records until at least the end of January 2029.
There is one special case. If you send your return in more than four years after the deadline, HMRC says to keep the records for 15 months after you file.
If records are lost or destroyed
Things do go missing. HMRC's advice is that if you cannot replace lost or destroyed records, you should provide your best figures. When you file, tell HMRC that you have used estimated or provisional figures. If you used provisional figures, you must also send in the actual figures once you have them.
A simple monthly routine
None of the following comes from HMRC's page, but it is a sensible way to put the guidance into practice:
- Pick one place for everything: a labelled folder, or a cloud folder with one sub-folder per tax year.
- Once a month, match your bank statement against your sales invoices and expense receipts, and note anything missing while memory is fresh.
- Photograph or scan paper receipts promptly, because till rolls and some receipts fade.
- Write the tax year and the 31 January date on the folder, so you know when records can safely be discarded.
- Keep a short note of any estimates you had to make, and why.
The short version
Keep a record of money in, money out and anything tied to VAT, PAYE or your personal income. Keep the proof, not just the figures. Hold on to it for at least five years after the relevant 31 January deadline. And if something goes missing, be open with HMRC about which figures are estimates.
This article is general information based on HMRC guidance and is not tax advice. Rules can change, so check the current guidance on GOV.UK or speak to a qualified adviser about your own circumstances.