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You must keep accurate records for your business. For example, your accounts, records of tax you have paid and all other records of your income and outgoings. You'll need these to help you fill in your Self Assessment tax return or to answer any questions from HM Revenue & Customs (HMRC). This guide deals with the records you'll need for your 2012-13 tax return and introduces new simpler records you may need for your 2013-14 tax return.
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Keeping up-to-date and accurate records from the start is important for your business. It makes it easier to fill in your tax return. A good record system helps you keep track of your expenses. You may have to pay a penalty if you don't keep records or if you don't keep your records for long enough.
Your business records must include:
All businesses are different and there are many types of detailed records that you may need to keep for your 2012-13 tax return. Here are some examples:
All this information will be useful for filling in your tax return and answering any questions that HMRC may have.
Keep your records either on paper or on computer. For electronic records you must:
If you've got more than one business you'll need to keep separate records for each business.
Keep detailed records. It will make it easier to answer any questions that HMRC has about your tax return.
You'll need to keep records of all your income and outgoings - whether you're paid 'gross' or with some tax taken off. If some tax has been taken off you'll need to keep your payment statements and - if higher rate tax is taken, keep the verification number. You'll need these for your tax return to reclaim any overpayment of tax.
Record keeping for the Construction Industry Scheme (CIS) - read a detailed guide
You may be able to claim capital allowances for certain assets. Rather than claiming the whole cost at the time you buy, you reclaim the cost over time. You'll need to keep detailed records to support your claim.
It will help if you keep separate records of:
Capital allowances - find out more
Tax allowances and reliefs - read detailed guidance
It's easy to make mistakes when you are recording sales if:
Even if you don't record these transactions through a till you still need to keep a record of them. You should note down the goods or services taken or supplied and their normal retail price. Your business profits must be worked out using this value.
You may have assets you use for both business and private use. For example, you may live in a flat above your shop premises and receive one shared electricity bill. For your 2012-13 tax return, you must keep enough records so that you can work out which costs relate to business use and which relate to your own use. If you use a vehicle for both business and private use, it's usually enough to keep a record of business and private mileage. Split the vehicle running costs in the same proportions.
You may want to use the new simplified expenses rules for future tax returns. See the section 'Simpler Income Tax records for your 2013-14 tax return' below.
Tax relief for the self employed - find out more
You must normally keep your business records for another five years after the online tax return deadline of 31 January, in case HMRC decides to check your return. The same date applies even if you've sent in a paper tax return.
The tax return deadline for an online 2012-13 return is 31 January 2014.
You send your tax return in before this deadline.
You need to keep your records until 31 January 2019, five years later.
But if HMRC send you, or you send back your tax return very late, you may need to keep your records for longer. You need to keep them until the later of:
You may need to keep your records for longer if HMRC has started a check into your tax return. In this case you'll need to keep your records until HMRC writes and tells you they've finished the check.
Find out about time limits for non-business records
Read more about checks into tax returns
If your business records have been lost or destroyed and you can't replace them you must let HMRC know what's happened. You should try to get the missing information in other ways. For example, you can ask banks for interest figures or copies of bank statements. They may charge for this.
Don't delay sending in the tax return while you wait for copies of records. Use the information you've managed to get together to fill in the tax return. If it turns out you can't replace the information you'll need to estimate the missing figures. You must tell HMRC whether any figures are:
If you amend the tax return later and you've underpaid tax, you may have to pay interest and penalties.
New rules introduced from 6 April 2013 mean that you may be able to keep simpler records for your 2013-14 tax return.
You can use 'cash basis' accounting, based on the money going in and out of your business, rather than traditional accounting methods that cover stock on hand, amounts owed and so on. You can also claim flat rate expenses for vehicles, use of home for business and use of business premises as a home.
Find out more about the cash basis on Gov.uk (Opens new window)
Read about simplified expenses on Gov.uk (Opens new window)
More about keeping business records on Gov.uk (Opens new window)
