How long to keep tax records in the UK – a small business guide

Wondering about the importance of record keeping and how long to keep tax records in the UK?

Not only do accurate records mean you’ll pay the right amount of tax, they can also keep you out of trouble in the event of an HMRC tax investigation.

What’s more, business owners are required by law to keep tax records for a certain number of years.

How long do you have to keep tax records for HMRC?

Self-employed Self Assessment taxpayers need to keep their business records for at least five years after the 31 January deadline of the relevant tax year.

So if you filed your 2023-24 tax returns by the relevant deadline on 31 January 2025, you’ll need to keep your records until 31 January 2030.

If you run a limited company and need to file a company tax return, there are more rules and regulations.

For example, you’ll need to keep your accounting records for longer – six years from the end of the last company year they relate to.

There are some situations when limited companies need to keep records even longer, such as:

• they show a transaction covering more than one of the company’s accounting periods
• the company has bought something that should last more than six years (like equipment)
• you sent the company tax return late
• HMRC is investigating your company tax return

Record keeping: step-by-step for the self-employed

Businesses need to keep records of their income and expenses, but the rules are different depending on your legal structure.

Record keeping for sole traders and partnerships in 3 steps

1. Choose an accounting method

There are two accounting methods the self-employed can use – cash basis accounting and accrual (or traditional) accounting.

As of 6 April 2024, cash basis has become the default method of accounting for small businesses. If you want to use traditional accounting, you have to opt out of cash basis.

Record keeping when using cash basis accounting:

• you record income and expenses by the date you receive a payment or pay a bill
• so if you invoice a customer on 27 March 2025 and don’t get the payment until the end of April 2025, you record the income for the 2025-26 tax year

Cash basis is a simpler method of accounting, HMRC expects businesses to take a consistent approach to record keeping. For example, if you decide to record payments two working days after they’ve been received, you should stick to this approach. 

As with all record keeping, you’ll need to keep track of stock, debtors, and creditors to help your business run smoothly.

Record keeping when using traditional accounting:

• you record income and expenses by the date you invoiced or were billed
• so if you’re billed on 25 March 2025 and don’t make the payment until the end of April 2025, you record the expense for the 2024-25 tax year rather than 2025-26

2. What business records to keep

HMRC lists the records that sole traders need to keep. They include:

• sales and income
• self-employed expenses
• VAT records (if you’re VAT registered)
• PAYE records (if you have employees)
• details of personal income (for example from savings, investments, and rental income)
• details of grants (for example, if you claimed through Self-Employment Income Support Scheme during the pandemic)

And if you use traditional accounting there’s more records you need to keep, like what you’re owed but haven’t received yet, as well as how much you’ve invested in the business over the year.

3. How to keep business records

There’s lots of information you need to keep – HMRC says you should also keep proof alongside your records, including all:

• receipts (for goods, stock, and expenses)
• bank statements
• cheque stubs
• sales invoices
• purchase orders
• till rolls
• bank slips

So it’s really important to have an effective filing system for all your business records. This should make everything easier when it comes to the tax-year end.

There’s accounting software and invoice software available that can automate some of these tasks and keep your records in one place. For example, some apps let you scan and upload your receipts.

If you do end up losing your records, you need to tell HMRC whether you’re using estimated figures or provisional figures when filling in your tax return. Provisional figures are best estimates while you wait for the actual figures.

Record keeping for limited companies in 3 steps

1. Company records

While limited company directors will need to file a Self Assessment tax return, they’ll have more responsibilities than sole traders when it comes to record keeping.

That’s because the limited company legal structure is more complex, as it’s a separate entity.

This means you need to keep records of the company itself (not just financial records).

2. Accounting records

If you don’t keep accounting records, you can be fined £3,000 and disqualified as a company director, so it’s important you do this correctly.

As well as information about the company, you need to keep financial and accounting records.

If your records are lost, you need to try to recreate them. Tell your corporation tax office straight away and mention it in your company tax return.

3. How to keep limited company records

With the breadth of business records that limited companies need to keep, it’s important to have an effective system in place.

Hiring professionals like accountants and bookkeepers can be useful – but make sure you do your research and only work with people who have a good reputation.

While professionals are often expensive, they free up your time so you can focus on running your business. Plus, they can advise on record keeping and your overall tax liabilities.

Accounting and invoice software can also make record keeping a lot easier.

Do you have any unanswered questions about keeping tax records? Let us know in the comments below.

More guides for small businesses

• Making Tax Digital: a guide for small businesses and the self-employed
• How to claim tax relief for small businesses
• When is the Self Assessment deadline?
• Public liability or professional indemnity insurance?

Photograph: Yuri A/peopleimages.com/stock.adobe.com