What Records Should a Sole Trader Keep for HMRC?
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What Records Should a Sole Trader Keep?
Running your own business as a sole trader gives you flexibility and control, but it also comes with responsibility. One of the most important obligations is keeping proper records for HM Revenue & Customs (HMRC).
At BCS Accountants, this month’s blog looks at what records a sole trader should keep for HMRC. For more information, contact us on 01524 824111.
Why Do Sole Traders Need to Keep Records?
If you’re self-employed as a sole trader, you are required to keep detailed records for HMRC. It helps you to accurately calculate profits and support your Self-Assessment return.
Even if you are only running a small side hustle, you still need to keep records. HMRC does not have a minimum income threshold before record-keeping is required.
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What Records Should a Sole Trader Keep?
Businesses can claim a range of allowable expenses incurred for the purposes of running. These expenses lower your taxable profit and tax bill, but they can only be claimed if you have supporting records, including:
Examples of allowable expenses include:
- Business travel expenses
- Utility bills if you work from home
- Marketing and advertising costs
- Rent for business premises
- Professional fees
You must also keep records of all money that comes into your business, so every sale and payment is recorded. This means your income tax liability and National Insurance contributions can be accurately calculated with supporting documents. These records include:
- Sales invoices
- Receipts
- Bank statements
- Payment confirmations
- Other income
Keep in mind that you need to retain records relating to any allowable expenses you intend to claim.
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How Long Must You Keep Your Records For?
As a sole trader, you need to keep copies of your records for a minimum of 5 years. If you become subject to a HMRC investigation, it is important you have supporting records.
Fines can be imposed if you don’t retain your records for long enough, even if you have no issues with your tax return.
How to Ensure Good Record Keeping
Record keeping is an essential part of compliance and effective financial management of your business. Having a dedicated business bank account keeps your business and personal finances separate, making tracking income easier. Additionally, accounting software can sync with your business, so you can record transactions in real-time.
At BCS Accountants, we can provide you with professional accounting services. No matter your requirements, our services can be tailored to you.
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Contact BCS Accountants
For accounting advice, contact our team at BCS Accountants. We work with clients across the Morecambe Bay area from Kendal down to Carnforth, Morecambe Lancaster. Call us on 01524 824111. Alternatively, send us a message via our contact form and we’ll be in touch.
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Contact BCS Accountants
Address:
BCS Accountants & Tax Consultants
Care of – TRW Accountants
95 King Street
Lancaster, LA1 1RH
Contact Details:
Tel: 01524 824111
Fax: 01524 825327
Email: enquiries@b-c-s.co.uk
