Every UK business has to keep records of what it earns and what it spends. HMRC decides how long you keep them. Sole traders keep records for five years after the 31 January deadline. Limited companies keep them for six years.
Those clocks do not all run together. A VAT registered company with staff may have to follow three retention rules at once. The fines are real. HMRC can fine a company £3,000 for poor accounting records. It can fine you another £3,000 for poor payroll records.
This article explains what to keep and how long to keep it. It also covers missing records.
Quick answer
Keep anything that backs up a figure on a tax return. Sole traders keep records for five years after the 31 January deadline. Companies keep them for six years from the end of the financial year. VAT records run for six years. Payroll records run for three years.
What counts as a business record?
A business record is any document that proves a number you report. Sales invoices, receipts, bank statements, till rolls and mileage logs all count. HMRC does not set a format. It sets a standard. Your records need to support every figure you file.
Records usually fall into two groups. One shows money coming in. The other shows money going out.
Money in covers sales invoices, till rolls, card settlement reports and cash books. Money out covers supplier bills, expense receipts and anything you claim against tax.
You also keep the paperwork behind those numbers. Bank statements and credit card statements are the main ones. Stock counts matter too if you hold stock.
Recording all this week by week is what bookkeeping involves. Keeping the paperwork afterwards is the legal side of the same job.
How long do you have to keep business records?
It depends on the tax. Sole traders keep records five years after the 31 January filing deadline. Limited companies keep them six years from the financial year end. VAT records run six years. Payroll records run three years from the end of the tax year.
Four rules, four clocks. Here they are together.
| Record type | Who it applies to | How long you keep it |
|---|---|---|
| Self Assessment records | Sole traders, partners, landlords | 5 years after the 31 January deadline |
| Company and accounting records | Limited companies | 6 years from the end of the financial year |
| VAT records | VAT registered businesses | 6 years, or 10 years under the One Stop Shop |
| Payroll records | Employers | 3 years from the end of the tax year |
One late filing changes the sole trader rule. File your return more than four years late and the clock resets. You then keep the records for 15 months after you send it.
Some records stay longer than the main period. If you buy equipment you still use after six years, keep the paperwork for longer too. The same applies if HMRC opens a check into your return.
What records do sole traders keep?
Sole traders keep records of business income and business costs for Self Assessment. HMRC also asks for records of personal income. Keep them for at least five years after the 31 January submission deadline. That is roughly six years of paperwork at any point in time.
GOV.UK sets out how long to keep your records for anyone who is self employed. The list is short:
- all sales and business income
- all business expenses you claim
- VAT records if you’re registered
- PAYE records if you employ anyone
- your personal income, including employment and savings
Landlords follow the same rules for rental income. So do partners in a partnership.
The five year clock is longer than most people expect. Records for the 2025 to 2026 tax year run to 31 January 2032. Six years of paperwork is a lot to store yourself. Many sole traders hand that work to small business bookkeeping services instead.
What extra records does a limited company keep?
A company keeps two sets of records. Accounting records cover money in, money out, assets, debts and stock. Company records cover shareholders, votes, resolutions, share transactions and loans secured on company assets. Both sets run for six years from the end of the last financial year they cover.
The company side is the part sole traders never deal with. GOV.UK lists it under company and accounting records.
Company records cover the ownership side:
- shareholders, plus the results of votes and resolutions
- debentures, which are promises to repay a loan on a set date
- indemnities the company gives
- transactions where someone buys shares
- loans or mortgages secured against company assets
Accounting records cover the trading side:
- all money the company received and spent
- assets the company owns
- debts owed by and to the company
- stock held at the financial year end
- all goods bought and sold
The penalty here is specific. HMRC can fine you £3,000 for failing to keep proper accounting records. A director can also be disqualified.
Directors have a longer list than most owners realise. Read limited company bookkeeping requirements for the day to day tasks.
What do VAT and payroll add?
VAT registration adds a six year clock and a VAT account. Employing people adds a three year clock. It also adds a £3,000 penalty of its own. A VAT registered company with two staff can end up following three retention rules at once.
VAT records
Register for VAT and you keep everything you buy and sell. That includes zero rated, reduced rate and exempt items. You also keep copies of the invoices you issue and the originals of invoices you receive.
On top of that, you keep a VAT account. GOV.UK sets out the rules on keeping VAT records. Your VAT account shows four figures:
- total VAT on sales
- total VAT on purchases
- VAT you owe HMRC
- VAT you can reclaim
Keep VAT records for at least six years. Use the One Stop Shop scheme and the period becomes ten years.
Payroll records
Employers keep what they pay staff and what they deduct. You also keep the reports and payments you send HMRC. Leave and sickness records count too. So do tax code notices and taxable benefits.
The rules on payroll records set a three year retention period from the end of the tax year. Fail to keep them and HMRC can estimate what you owe. It can then charge a penalty of up to £3,000 on top.
Do business records have to be digital?
Some of them do. VAT registered businesses already keep certain VAT records digitally under Making Tax Digital. A photo of a receipt is fine as proof. The record just has to be readable. You need to produce it when HMRC asks.
HMRC accepts scans and photos for most paperwork. You do not have to keep the paper original in a box. Good software stores the image against the transaction. That is better than searching a drawer.
Digital storage has one trap. A folder of unnamed photos is not a record. HMRC wants to see the receipt linked to the entry it supports.
What happens if your records are missing?
Tell HMRC on the return itself. Use estimated figures, meaning your best guess. Or use provisional figures while you wait for the real ones. You replace provisional figures later. Estimated figures stay, so be ready to defend them if HMRC asks.
Lost records do not excuse the return. They only change how you file it.
Rebuild what you can first. Banks reissue statements. Suppliers reissue invoices. Card processors can export settlement reports going back years.
Then flag the gap on the return itself. A declared estimate is one conversation. A quiet guess is another.
Poor records also cost money in ordinary ways. Missing receipts can mean lost expense claims and a bigger tax bill.
Getting your records in order
Start with separation. Keep a business bank account separate from your personal one. Companies have to. Sole traders should too.
Then pick a storage method and use it every week. Software that stores the receipt image against the transaction is the simplest option. Use a folder rule if you work from a spreadsheet.
The retention clocks keep running whether you organise the paperwork or not. Six years of unsorted receipts is still six years of receipts.
DASA’s outsourced bookkeeping service can handle the weekly recording and keep the proof against each entry. If you want a quote, send us your business type and whether you’re VAT registered.
This article gives general information about UK business record keeping. It is not financial, tax or legal advice. Every business is different. Speak to a qualified accountant about your own situation.
Frequently asked questions
How long do I have to keep business records in the UK?
It depends on the tax. Sole traders keep records five years after the 31 January filing deadline. Limited companies keep them six years from the financial year end. VAT records run six years. Payroll records run three years from the end of the tax year.
What business records does HMRC want?
Anything that proves a number on your return. Sales invoices, till rolls, supplier bills, expense receipts, bank statements and mileage logs all count. VAT registered businesses also keep a VAT account. Employers keep pay, deduction and leave records.
What happens if I lose my business records?
Tell HMRC on the return. You can file estimated figures, which are your best guess, or provisional figures while you wait for the real ones. Rebuild what you can from bank statements and supplier copies first.
What is the penalty for not keeping proper business records?
HMRC can fine a company £3,000 for failing to keep proper accounting records, and a director can be disqualified. For payroll, HMRC can estimate what you owe and charge a penalty of up to £3,000.
Do business records have to be kept digitally?
Some do. VAT registered businesses keep certain VAT records digitally under Making Tax Digital. For other records, HMRC accepts scans and photos as proof, as long as they are readable and linked to the entry they support.