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You must keep records of your business income and expenses for your Self Assessment tax return if you鈥檙e a:

• sole trader
• partner in a business partnership

You鈥檒l also need to keep records of your personal income.

If you鈥檙e the nominated partner in a partnership, you must also keep records for the partnership.

Recording your income and expenses

If you prepare accounts for your business, you will need to choose the dates you keep records to and from 鈥� this would usually be the same dates each year.

It may be easier to complete your tax return if the dates match the tax year (6 April to 5 April). This is because HM Revenue and Customs (HMRC) works out tax based on the tax year. If your accounts do not match this, you will need to allocate profits to 2 different accounting periods.

If you do not prepare accounts, you will need to record your income and expenses for each tax year (6 April to 5 April).

Accounting methods

You鈥檒l need to choose an accounting method.

From the 2024 to 2025 tax year, cash basis is the default method of accounting. You must opt out if you want to use traditional accounting or cannot use cash basis accounting.

Cash basis accounting

Most businesses can use cash basis reporting.

With this method, you only record income or expenses when you receive money or pay a bill. This means you will not need to pay Income Tax on money you have not yet received.

Traditional accounting

Many businesses use traditional accounting where you record income and expenses by the date you invoiced or were billed.

You鈥檒l need to keep records of:

• all sales and income
• all business expenses
• VAT records if you鈥檙e registered for VAT
• PAYE records if you employ people
• records about your personal income
• your grants, if you claimed through the Self-Employment Income Support Scheme - check how much you were paid if you made a claim

Why you keep records

You do not need to send your records in when you submit your tax return but you need to keep them so you can:

• work out your profit or loss for your tax return
• show them to HM Revenue and Customs (HMRC) if asked

You must make sure that:

• your records are accurate
• you can identify business transactions

You might be able to use a personal or business bank account for your business. Check with your bank which type of account you can use for business transactions.

Keep proof

Types of proof include:

• all receipts for goods and stock
• bank statements, chequebook stubs
• sales invoices, till rolls and bank slips

If you鈥檙e using traditional accounting

As well as the standard records, you鈥檒l also need to keep further records so that your tax return includes:

• what you鈥檙e owed but have not received yet
• what you鈥檝e committed to spend but have not paid out yet, for example you鈥檝e received an invoice but have not paid it yet
• the value of stock and work in progress at the end of your accounting period
• your year end bank balances
• how much you鈥檝e invested in the business in the year
• how much money you鈥檝e taken out for your own use

You must keep your records for at least 5 years after the 31 January submission deadline of the relevant tax year. HM Revenue and Customs (HMRC) may check your records to make sure you鈥檙e paying the right amount of tax.

Very late returns

If you send your tax return more than 4 years after the deadline, you鈥檒l need to keep your records for 15 months after you send your tax return.

If your records are lost, stolen or destroyed

If you cannot replace your records, you must do your best to provide figures. Tell HMRC when you file your tax return if you鈥檙e using:

• estimated figures - your best guess when you cannot provide the actual figures
• provisional figures - your temporary estimated figures while you wait for actual figures (you鈥檒l also need to submit actual figures when available)