Business records if you're self-employed
Overview
You must keep records of your business income and expenses for your tax return if you’re self-employed as a:
- sole trader
- partner in a business partnership
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.
Accounting methods
You’ll need to choose an accounting method.
From the 2024 to 2025 tax year, cash basis is now 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 small 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 in your accounting period.
Example
You invoiced someone on 15 March 2023 but did not receive the money until 30 April 2023. Record this income for the 2023 to 2024 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 invoiced a customer on 28 March 2023. You record that invoice for the 2022 to 2023 tax year - even if you did not receive the money until the next tax year.