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People who are self-employed have to maintain business records, which detail all the money coming into a business and the expenses incurred by the company.

These figures will be needed to complete the self-assessment tax return at the end of the relevant tax year. If you intend to claim expenses, tax reliefs or allowances, you will also need evidence. For a small enterprise, it may be possible to keep less complicated records, rather than accounting for invoices still outstanding and stock that is on hand.

Records that may be needed

There are many types of records that you may be required to keep, depending on the size of your company. If you are a sole trader, you may needrecord keeping to keep less detailed records than a company with a larger turnover. If you are employed in addition to being self-employed, you will require a P60 or P45 form from your employer, detailing pay and tax for the year.

Also, if you have any employees you will require a payroll record. Receipts and invoices may be needed, as well as bank statements. If you have a company car, a record of the business mileage must be kept.

In addition to this, any money that has been drawn from the company for your own personal use will have to be recorded. Any documents that relate to the business should also be retained in case HM Revenue and Customs (HMRC) make any queries.

Records that have to be retained

Although you may not have to keep extremely detailed business records, such as large corporations must, you will still have to show documents of all sales and the takings for the company, along with figures of any expenses and purchases made.

Keeping records

A set of records must be kept for each business, so that you have information for each company to hand when you complete your end of year tax return. Records may be kept on paper or electronically, although if you submit documents to an accountant it may be easier to keep them digitally. All information must be recorded and a back-up of the system must be performed, so that the information is not lost.

It is preferable to maintain accurate, timely and orderly records, so that all information relating to your business is available if HMRC make any queries. Completing your self-assessment tax return will also be much easier if all information is easily accessible, meaning less of a chance of making any errors.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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