Guide to keeping accounting records

Guide to keeping accounting records

Record keeping is an important part of accounting! There are different kinds of records you need to keep depending on whether you’re a director of a limited company or a sole trader. Find out which records you need to keep depending on your business.

Why do I need to keep accounting records?

Keeping accounting records is a requirement from HMRC. You don’t need to submit all your records on your tax return, but you do need to make sure they’re accurate and keep them for a set amount of time. This is so that HMRC can request to see your records if they need to.

How long do I need to keep accounting records for?

How long you need to keep records is different for sole traders and limited companies.

As a sole trader you are required to keep records for at least 5 years after your 31 January tax deadline for the tax year.

As a limited company, the director needs to keep accounting records for 6 years from the end of the financial year. But, you may have to keep them for longer if the transaction covers more than the company’s accounting period, you send your tax return late, or HMRC is doing a compliance check.

Which records do I need to keep?

There are some differences which records you’re required to keep as a limited company or as a sole trader. Limited company directors have strict responsibilities, and a longer list of required records to keep.

Record keeping as a limited company director

There are specific accounting records that you need to keep as a limited company. This can be done by yourself or an accountant, but ultimately you will be legally responsible for the records.

Your records need to include:

  • All money received and spent by the company. This includes documents like grants, support scheme payments, receipts, cash books, invoices, contracts, bank statements.
  • Assets
  • Debts
  • Stock owned and stocktaking
  • Goods bought and sold, and who you bought and sold them to
  • Records and calculations needed for annual accounts and your Company Tax Return

When you prepare your annual accounts (statutory accounts) you need to have the following information:

  • Balance sheet
  • Profit and loss report
  • Any notes on your accounts

You also need to keep records on other aspects of your company, like your directors, loans and transactions relating to shares.

Read more about the responsibilities of a limited company director here

Record keeping as a sole trader

As a sole trader, you need to keep records that relate to your Self Assessment tax return, employees and VAT Returns. Here’s what you should keep:

  • Sales and income
  • Business expenses
  • Your personal income
  • VAT records (if you’re registered)
  • PAYE records (if you have employees)

You also need to keep proof of these transactions, including all receipts for goods, bank statements, sales invoices and till rolls.

Read more about becoming a sole trader here

Keep records with Bokio

Accounting software is a simple way to help you keep all your records in one place. Bokio is a free accounting software where you can do your bookkeeping, invoicing and expenses.

You can access automated reports, prepare for your Self Assessment tax return and submit VAT Returns for Making Tax Digital. Plus, you can upload extra documentation too like bank statements and customer statements.

With Bokio, you’ll have everything you need to help you keep the right records digitally.