Monthly Archive October 2020

Record keeping for the sole trader

If you are self employed as a sole trader you will need to fill in an annual tax return each year and submit it to HMRC showing any earnings you have received and any expenditure that you can claim for. By law you need to keep these records for five years from the latest date of sending back your tax return.

Many small businesses use cash basis accounting and record income and expenses when they receive money or pay a bill. It is the most straightforward way to record transactions. It is important to keep proof of income and expenses even though you do not need to send these to HMRC when completing a tax return.

The important records that should be kept are evidence of all sales and income, all business expenses and records of any personal income such as pensions and other employment. If you use a vehicle for your work, receipts for fuel and other vehicle expenses should be kept as this will be part of your expenses. It is a good idea to keep a record of the mileage of the vehicle as sometimes it is better to claim mileage costs rather than the actual costs of fuel etc.