Keeping records is one of those parts of running a business that many people feel unsure about at first. It often sounds technical or time-consuming, but the good news is that the rules are often simpler than they appear once you understand what is actually required.
This guide is written for beginners and explains, in plain English, what records UK businesses must keep, how long they need to be kept for, and why this all matters. If you run a business in Farnborough or anywhere else in the UK, the same rules apply to you.
Why Record Keeping Matters
Once you start trading, UK law requires you to keep accurate and complete business records. This is so HM Revenue & Customs (HMRC) can check that your income and expenses have been reported correctly and that you have paid the right amount of tax.
Just as importantly, keeping good records helps you run your business better.
It allows you to:
- See whether your business is actually making a profit
- Understand where your money is going
- Prepare your tax returns with much less stress
- Respond confidently if HMRC ever asks for information
It’s important to remember that keeping records is a legal requirement. Using an accountant or bookkeeper to help you is optional.
What Counts as Business Records?
This is simpler than it sounds. Business records are just the documents and information that show what money has come into your business, what money has gone out, and what that money was for.
At a basic level, most UK businesses should be keeping:
- Sales records and invoices you’ve sent to customers
- Receipts for all your business expenses
- Bank statements (from your business account, if you have one)
- Records of any cash payments, if you take them
These records can be kept on paper or digitally. HMRC does not require a specific system or format, as long as the information is accurate, complete, and readable.
Records Sole Traders Must Keep
If you are a sole trader, you are legally required to keep records of all your business income and all your allowable business expenses. It’s also wise to keep a record of any personal money you put into or take out of the business.
In practice, this often includes things like:
- Invoices you’ve issued to your customers
- Receipts for tools, materials, or services you’ve paid for
- Mileage records, if you use your vehicle for work
- Bank statements showing your business transactions
These are the records you will use to complete your Self Assessment tax return each year.
Records Limited Companies Must Keep
Limited companies have a few extra record-keeping responsibilities. This is because the company is a separate legal entity from you as an individual.
In addition to all the usual income and expense records, limited companies must also keep:
- Records of all company money and assets
- Details of directors and shareholders
- Records of any dividends paid to shareholders
- Copies of annual accounts and confirmation statements filed with Companies House
These records are needed to meet both Companies House and HMRC requirements and to show how the company is being run.
How Long Do You Need to Keep Records?
This is a very common question. How long your records must be kept depends on how your business is set up.
Sole traders
Sole traders must usually keep their records for at least five years after the 31 January submission deadline for the relevant tax year.
Limited companies
Limited companies must usually keep their records for at least six years from the end of the financial year they relate to.
It’s important to know that records may need to be kept for longer if HMRC is carrying out a check or enquiry, if there is an ongoing dispute, or if the records relate to assets the business still owns (like a van or a computer).
Digital vs Paper Records
You can keep your business records either digitally (on a computer) or on paper. Many new businesses choose to keep digital records because they are often easier to organise, are less likely to be lost or damaged, and make it simpler to review information over time.
It is also worth being aware of Making Tax Digital (MTD). This is an ongoing government initiative to move tax reporting online. From April 2026, many sole traders and landlords with income over £50,000 will be required to use MTD-compatible software to keep digital records and send updates to HMRC. This requirement will extend to more businesses in the following years. Because of this, starting with digital records from day one is becoming the most sensible and future-proof approach.
There is no requirement to use specific software. What matters most is that your records are accurate and kept up to date.
Common Record-Keeping Mistakes
Many new business owners make similar mistakes, especially in the early stages.
These often include:
- Losing or forgetting to keep receipts for small purchases
- Mixing personal and business transactions in the same bank account
- Waiting until the end of the year to try and organise a whole year’s worth of records
- Keeping records that are unclear or incomplete
Simple habits, such as taking a photo of receipts as you get them or checking your records once a month, can make a huge difference and save you a lot of stress later on.
A Note on Accountancy Firm Records
It’s also helpful to know that even after you leave an accountant, they have their own legal and professional obligations to keep your records for a set period. This is usually for at least five to seven years after you’ve stopped working with them.
They do this to comply with Anti-Money Laundering (AML) regulations, for tax purposes, and to protect themselves in case of any future questions about the work they did for you.
For example:
- Anti-Money Laundering (AML) Records: For identity verification purposes, records must be kept for five years.
- Tax Records: HMRC generally requires records to be held for six years.
- Professional Best Practice: Most firms keep files for at least seven years to answer any questions that might arise about past work.
When you leave an accountant, they must return all your original documents. They are also professionally required to provide key information, like your last set of approved accounts, to your new accountant to ensure a smooth handover.
Do You Need a Bookkeeper or Accountant?
There is no legal requirement to use a bookkeeper or accountant to manage your records. Some people are happy keeping their own, particularly when the business is small and straightforward. Others choose to get professional support to save time, reduce the risk of errors, or simply for peace of mind.
The important thing is not who keeps the records, but that they meet all legal requirements and accurately reflect what is happening in your business.
If you would like calm, practical support, Penney’s Accountancy works with UK small businesses in Farnborough and the surrounding areas. We can provide you with a clear checklist of everything we need and work with you throughout the year to ensure your records are always up to date, making your year-end as smooth as possible.
Want to Learn More in Your Own Time?
For those who want to build their confidence and understand these topics in more detail, Penney’s Finance School offers an online, self-paced business and finance course. It covers everything from company setup to cash flow and tax, allowing you to learn at your own pace.
Important information
The information provided in this article is intended as general guidance for UK businesses only and reflects UK tax legislation and HMRC guidance as of February 2026.
Tax rules and business requirements can change, and individual circumstances vary. Before acting on any of the information above, we recommend speaking to a qualified accountant who can provide advice tailored to your specific situation.