As a self-employed individual, whether a sole trader or partner, you must keep accurate records of your business income and expenses to back up your self-assessment tax return. You should also keep your personal income details up to date. Nominated partners will also need to keep partnership records.
You can also choose an accounting method. Since the 2024-25 tax year, the cash basis is the default. This means that you record income and expenses when money is received or paid. There will therefore be no Income Tax liability on monies not yet received. This is very different to traditional accounting where you record income and expenses by the date you invoiced or were billed.
Your records should detail all sales, income, business expenses and any grants received. If applicable you must also include VAT and PAYE records. Holding proof, such as receipts, bank statements and sales invoices, allows you to calculate profit or loss and present the records to HMRC if requested. You should ensure all your records are accurate and clearly identify business transactions.
You must retain your business records for at least 5 years after the 31 January submission deadline of the relevant tax year. For instance, if you sent your records for 2022-23 by the 31 January 2024 deadline then you must keep these records until at least the end of January 2029. If records are lost or destroyed, provide your best estimated figures and inform HMRC.
Maintaining diligent and accurate records for the specified period is vital for meeting your tax obligations and ensuring compliance with HMRC requirements.
