PLEASE NOTE: The charity TaxAid advises only those people on low incomes whose problems cannot be resolved with HMRC.

Record keeping

Self-employed - running a business and paying tax

Everyone in business has to keep records. You must normally keep them for 5 years following the usual 31 January tax return filing deadline, but if you are very late sending in your returns you may need to keep them longer.

A simple single entry cash book or simple computer spreadsheet or accounting system is enough for most small businesses. It must be kept up to date.

You will need to keep all the necessary paperwork to back up your cash book or computerised records.  This includes bills you pay and copies of the bills / invoices you send to customers. It is sensible to have backups and hard copy of essential information in case your computerised records are damaged or lost.

Record keeping is an essential part of being in business. If records are poor, it will be very difficult to challenge any claims made by HM Revenue and Customs during a tax enquiry that you have not included all your income or have made deductions for non-business expenses.

Accurate records also make it much easier to fill out your tax return correctly and quickly.

If you are VAT-registered, there are more detailed requirements for record keeping. It would be wise to take advice in these circumstances.

There is some guidance on record keeping on the Gov.uk website. As tax administration moves digital, you may need to consider keeping your records using book-keeping software which can interface with HMRC through your digital tax account.