Self-Employed – Are your business records in order?
Running your own business brings freedom, but it also brings responsibility. Therefore, keeping accurate records is essential. Moreover, HMRC expects every self-employed person to maintain clear, up-to-date information.
Who needs to keep records?
Firstly, if you are a sole trader or partner, you must keep records of your business income and expenses. In addition, you should keep your personal income details up to date. Furthermore, nominated partners must also maintain partnership records.
Choosing your accounting method
Since the 2024-25 tax year, the cash basis is the default accounting method. Under this approach, you record income and expenses when money actually moves. Consequently, you will not owe Income Tax on money you have not yet received.
However, traditional accounting works differently. Specifically, you record income and expenses by the invoice or billing date. Therefore, choose the method that best suits your business.
What records should you keep?
Self-Employed – Are your business records in order across all key areas? Your records should cover:
- All sales and business income
- Business expenses
- Grants received
- VAT records, where applicable
- PAYE records, if you employ staff
Additionally, always keep supporting proof. For example, save receipts, bank statements and sales invoices. As a result, you can calculate profit or loss accurately. Moreover, you can share records with HMRC quickly if they ask.
Keep business and personal separate
Furthermore, make sure your records clearly identify business transactions. Otherwise, mixing personal and business expenses can cause confusion later. Consequently, many self-employed people use a separate business bank account.
How long should you keep records?
You must retain your business records for at least five years after the 31 January submission deadline. For instance, if you filed your 2022-23 return by 31 January 2024, keep those records until the end of January 2029.
However, mistakes sometimes happen. If your records are lost or destroyed, provide your best estimates. Then, inform HMRC as soon as possible.
Why record-keeping matters
Ultimately, diligent record-keeping helps you meet your tax obligations. Moreover, it ensures full compliance with HMRC requirements. Therefore, staying organised protects your business and your peace of mind.
Speak to our team
Self-Employed – Are your business records in order, or could you use a helping hand? Contact our team today for friendly, expert advice on record-keeping and self-assessment. We will help you stay compliant and confident all year round.
