Business records if you're self-employed
Overview
You must keep records of your business income and expenses for your Self Assessment tax return if you’re a:
- sole trader
- partner in a business partnership
This guide is also available in Welsh (Cymraeg).
You’ll also need to keep records of your personal income.
If you’re the nominated partner in a partnership, you must also keep records for the partnership.
There are different rules on keeping records for limited companies.
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 – 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’ll 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.
Example
You record your income and expenses in line with the tax year (6 April to 5 April). You invoiced someone on 15 March 2024 but did not receive the money until 30 April 2024. Record this income as received on 30 April 2024 in the 2024 to 2025 tax year.
Traditional accounting
Many businesses use traditional accounting where you record income and expenses by the date you invoiced or were billed.
Example
You prepare accounts to 31 March each year. You invoiced a customer on 28 March 2024. You record that invoice for the 2023 to 2024 tax year - even if you did not receive the money until the next tax year.