Record-keeping for small businesses
If you work for yourself or are running a small business – whether you’re a freelancer, tradesperson, designer, hairdresser or consultant – keeping good records is one of the simplest ways to stay on top of your business admin.
Knowing exactly how much money is coming in and going out, will help you to work out your tax and National Insurance correctly, and claim back any ‘expenses’. Expenses are money you’ve spent on running your business. We’ll talk about these in more detail later.
How do you keep a record?
Simply put, a record is a way of showing money coming in and out of your business. This includes invoices, receipts, bank statements, bills, and order confirmations. If you use your own vehicle for work, a mileage log counts as a record too.
There are lots of ways you can keep records, so find a system that fits into your routine. Most small business owners find that once they have a simple system in place, it becomes second nature.
You can keep records:
- on your phone
- on your computer
- in an app
- in a software programme
- in a notebook
Helpful tip:
It’s worth getting used to keeping digital records so that you’re ready for Making Tax Digital for Income Tax – and to help you do your tax return. You can find everything you need to know on our Making Tax Digital for Income Tax page and our Self Assessment page.
Accurate records make tax returns easier
When your records are organised, you can see exactly what you’ve earned and what you’ve spent. You’ll also be able to easily see what business expenses you can claim for.
Plus, if we ever ask you for more information about your tax return or need you to show us proof of any income or expenses, you’ll be able to share what’s needed with us quickly and confidently.
They also help your business run smoothly
Having clear records does more than help with tax. They can help you with running your business too. This is because you can:
- see what you’re earning and your cash flow
- spot which jobs – and clients – pay best
- plan for busy and quiet times
- spot opportunities to grow
- make confident money decisions
Helpful tip:
Many small business owners say keeping records helps them feel less stressed about both tax and money.
Record every payment that comes in
When one of your customers makes a payment to your business, make sure you record:
- the date
- the customer or client name
- the amount
- what it was for
- how they paid (cash, card, bank transfer or online)
Keep copies of invoices, sales confirmations, card machine summaries and bank statements. If you take bookings through a system, you can download reports from there too.
Record every payment that goes out
It’s also important to record everything you spend on running your business – these are the expenses we talked about earlier. There are many different types of business costs that you can claim for – so you should keep all receipts and invoices.
Here are the types of things you might spend money on to run your business.
Supplies:
- tools
- materials
Running costs:
- energy bills
- phone use
- fuel or travel
- software
- insurance
- website hosting
- marketing
Professional support:
- accountants
- bookkeepers
- legal advisers
This isn’t a complete list. You can find out what counts as a business expense on GOV.UK.
If there’s something you use for both your personal life as well as your business (for a lot of small business owners, this is their mobile phone), you only need to keep a record of the business portion.
So, if you use your mobile phone 50% of the time for business and it costs you £30 a month, you’d only log £15 a month for it.
Helpful tip:
Regularly taking a quick photo of receipts and noting down your income and expenses each week are good habits to start.
Travel costs need a bit more detail
Travel is another common business expense and covers either mileage or fuel, train, bus or taxi fares, parking, and tolls.
If travel is part of your work, it’s important to track where you went, the date, why you travelled, and – if you’re using your own vehicle – the miles you travelled. You can find more about what to record and how to claim for travel expenses on GOV.UK.
Having this level of detail makes claiming straightforward and keeps everything clear.
Software and apps can make things easier
Lots of small business owners find apps and software can help with record-keeping because they can:
- take photos and store receipts safely
- show what you earn and spend
- link to your bank account
- help create invoices
- keep everything in one place
- make simple summaries of your finances
- save you time
Helpful tip:
It’s worth considering software that works with Making Tax Digital for Income Tax. You can find a list on GOV.UK.
Keep your records
The deadline for each tax return is on or before 31 January, following the end of the tax year.
So, for the tax year that runs from 6 April 2025 to 5 April 2026, your tax return deadline will be on or before 31 January 2027.
You then need to keep all the records for that tax return for at least 5 years. This means all your records for the 2025 to 2026 tax year should be kept until at least 31 January 2032.
This gives you time to look back if you need to, and means you’re ready if we ever ask to check anything.
Key thing to remember:
However you keep your records, you’ll need to hold onto them for at least 5 years after your tax return’s deadline.
Small habits make a big difference
The key to good record-keeping is doing it little and often:
- keep everything in one place
- update your records weekly or monthly
- take photos of receipts as soon as you get them
- check your records against your bank statements to make sure nothing’s been missed
Starting these small habits now will make managing your tax far simpler and help you run your business with confidence. You can find more guidance on what records to keep and how to organise them if you’re self-employed on GOV.UK.