- 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.
You’ll need to choose an accounting method.
Many businesses use traditional accounting where you record income and expenses by the date you invoiced or were billed.
You invoiced a customer on 28 March 2020. You record that invoice for the 2019 to 2020 tax year - even if you did not receive the money until the next tax year.
Cash basis accounting
Most small businesses with an income of £150,000 or less 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 2020 but did not receive the money until 30 April 2020. Record this income for the 2020 to 2021 tax year.