What Records Do I Need to Keep as a Sole Trader?

Keeping proper business records might not be the most exciting part of being self-employed, but it’s one of the most important. HMRC can request evidence of your income and expenses at any time, and failing to keep adequate records can result in penalties — even if your tax return was correct.

What Records Must You Keep?

As a sole trader, you’re required to keep records of:

• All income — invoices issued, cash received, bank transfers, online payments
• All business expenses — receipts, invoices, and bills for anything you’ve claimed or intend to claim
• Business bank statements — showing money coming in and going out
• VAT records (if you’re VAT registered) — VAT invoices, the VAT account, and copies of VAT returns
• PAYE records (if you employ anyone) — payslips, P60s, and records of employer NI contributions

How Long Must You Keep Them?

For Self Assessment purposes, you must keep your records for at least 5 years after the 31 January submission deadline for the relevant tax year. HMRC sets this out in their official guidance on self-employed record keeping. For example, records for the 2024/25 tax year (submitted by 31 January 2026) must be kept until at least 31 January 2031.

If HMRC suspects fraud or deliberate errors, they can go back further — but for most sole traders, five years is the benchmark to work to.

Do Records Have to Be Digital?

For most sole traders currently, records can be kept digitally or on paper. However, if your turnover exceeds the Making Tax Digital (MTD) threshold, you’ll be required to keep digital records using MTD-compatible software. Even if you’re not yet required to, digital records are easier to organise, search, and back up — so it’s worth getting into the habit early.

What Counts as a Valid Receipt?

HMRC accepts digital copies of receipts — you don’t need to keep paper originals as long as the digital copy is a clear, legible image. Many bookkeeping apps let you photograph receipts on your phone and attach them directly to the relevant transaction. This makes expense tracking much easier at tax time.

What Records Do You Need for Expenses?

For each expense you claim, you should have evidence that shows:

• What was purchased
• Who it was purchased from
• The date and amount
• That it was for business use

For mileage, keep a mileage log with dates, destinations, and the business purpose of each journey. For working from home costs, note the hours worked from home. See our full guide to expenses sole traders can claim for more detail.

What If You Lose a Receipt?

Try to get a duplicate from the supplier if possible. In some cases, a bank or credit card statement showing the transaction may be accepted, although it provides less detail than a full receipt. For small amounts this may be acceptable, but for larger expenses it’s best to have the full documentation.

Simple Ways to Stay Organised

• Photograph receipts the moment you get them using a phone app
• Keep a separate business bank account so transactions are clearly separated
• Reconcile your records monthly rather than leaving it all to the end of the year
• Use a spreadsheet or bookkeeping software to record income and expenses as you go

Good habits throughout the year make your Self Assessment return far simpler to complete — or much easier for your bookkeeper to prepare on your behalf.

Let PBAS Handle the Organisation for You

If keeping on top of your records feels like a chore, PBAS can take it off your hands. Our bookkeeping services for sole traders keep everything in order throughout the year, so you’re always ready for tax time — and never caught out by an HMRC enquiry.