- 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.
Example You invoiced a customer on 28 March 2017. You record that invoice for the 2016 to 2017 tax year - even if you didn’t 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 won’t need to pay Income Tax on money you haven’t yet received in your accounting period.
ExampleYou invoiced someone on 15 March 2017 but didn’t receive the money until 30 April 2017. Record this income for the 2017 to 2018 tax year.