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  • Writer's picturethecbsltd




After having decided on your product, named your business, contacted HMRC regarding National Insure number, paying national insurance, registering for (CIS) if working in the construction industry and deciding if VAT is right for your business it’s time to start selling your product.

With selling your product comes the responsibility of keeping records of your business income and expenses for your tax return if you are self-employed as a:

· Soler Trader

· Partner in a business partnership

If you are the nominated partner in the partnership, it is your responsibility to keep records for the partnership.

For Limited Companies different rules apply

To complete your self-assessment tax return, you will also need records of your personal income i.e. bank interest, share dividends etc


If you are self-employed, accounts will need to be prepared to go with your annual tax return. Different businesses vary so much in what records are relevant, and how complex the records need to be. However, for your accounting year (which often, but not always, ends on 31 March or 5 April), and for shortly afterwards we usually need:

  • Bank statements for all bank accounts that were part of the business (please make sure that they are actually all there, and that they cover from the very first day to very last day of your year).

  • Cheque books and pay-in books for all such bank statements.

  • Statements for any credit cards used in the business.

  • Details of your income, such as your sales invoices or income records.

  • Details of your expenses, such as invoices or any expense records you keep.

  • If you are VAT registered and have prepared your own VAT returns: copies of your returns, together with calculations which show how your figures were worked out.

  • Agreements for any loans or hire-purchase agreements taken out.

  • If you employ staff and operate your own payroll: all the payroll records.

  • If you work under the Construction Industry Scheme: all your CIS payslips for the tax year to 5 April.

  • Your record of business miles travelled.

  • Details of any vehicles or equipment you have bought or sold.

Unless HMRC request to see your bookkeeping records you only need them to work out your profit or loss for your tax return.

These records must be kept for 5 years after the 31st January self-assessment submission as HMRC may check that you are paying the correct amount of tax.

If for some reason these records are lost, stolen or destroyed and you are unable to replace some or all of these records you should advise HMRC when you file your tax return. Advise HMRC if the figures you are providing are Estimated or provisional.


When you collate your business records you need to decide which accounting method to use for your business be it traditional account or cash basis accounting.


This method is used by many businesses, this method requires you to record income and expenses on the date you invoiced or received a bill.

So, if you invoiced a client on 29 March 2020, you record that invoice as revenue for the 2019 – 2020 tax year. Regardless if the payment is not received until the next tax year 2020-2021.


This method is only available to use by businesses with an income of £150,000 or less. If during your tax year revenue increases above £150,000 you can still remain in the scheme but if your revenue exceeds £300,000 in the next tax year you will have to use the traditional accounting method. With this method income or expenses are recorded when you receive or pay a bill.

So, if you invoiced a client on 14 March 2020 but did not receive payment until 13 April 2020, the income is recorded in the 2020-2021 accounts.

Cash Basis accounting is not allowable for Limited companies or Limited liability partnerships.

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