Every UK business has to keep records of what it earns and what it spends. HMRC sets 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 run separately. A VAT registered company with staff runs three of them at once. Miss the rules and 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 guide sets out what you keep and for how long. It also covers what poor records cost you.
Quick Answer
Keep anything that backs up a figure on a tax return. Sole traders keep records five years past the 31 January deadline. Companies keep them six years from the financial year end. VAT records run six years. Payroll records run three years. Good records also protect you if HMRC finds an error.
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 doesn’t set a format. It sets a standard. Your paperwork has to support every figure you file.
Records fall into two groups. One group proves money coming in. The other proves 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 half of the same job.
How Long Do You Have to Keep Business Records?
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, or ten under the One Stop Shop. Payroll records run three years from the end of the tax year.
Four rules, four clocks. Here’s each one.
| 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 headline period. Buy equipment you’ll use past six years. Keep the paperwork past six years too. The same goes 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 your personal income. Hold all of it for at least five years after the 31 January deadline. That’s roughly six years of paperwork in a drawer at any one time.
GOV.UK sets out how long to keep your records for anyone self-employed. The list itself 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 sit under 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 pass the job to small business bookkeeping services instead.
What Extra Records Does a Limited Company Keep?
A company keeps two sets. Accounting records cover money in, money out, assets, debts and stock. Company records cover shareholders, votes, resolutions, share sales and secured loans. Keep accounting records six years from the financial year end. Keep resolutions and minutes at least ten years.
The company set is the part sole traders never deal with. GOV.UK gives the full list of company and accounting records. The ten year rule for resolutions and minutes comes from section 355 of the Companies Act 2006.
Company records cover the ownership side:
- shareholders, plus the results of votes and resolutions
- debentures (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 not keeping proper accounting records. You can also lose the right to act as a director.
Directors have a longer list than most owners realise. Our guide to limited company bookkeeping requirements covers 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 runs three time limits at once.
VAT records
Register for VAT and you keep records of everything you buy and sell. That includes zero rated, reduced rate and exempt items. You also keep copies of invoices you issue and originals of invoices you get.
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 what you buy
- VAT you owe HMRC
- VAT you can reclaim
Flat Rate Scheme users also show their flat rate percentage and turnover. Hold VAT records for at least six years. Use the One Stop Shop scheme and that becomes ten.
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.
GOV.UK says to keep payroll records for three years 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?
More of them each year. VAT registered businesses keep VAT records digitally under Making Tax Digital. Since 6 April 2026, sole traders and landlords with qualifying income over £50,000 must too. A photo of a receipt is fine as proof, if you can read it.
Making Tax Digital for Income Tax means keeping your records in compatible software. The income limit drops to £30,000 from 6 April 2027. It drops to £20,000 from 6 April 2028.
HMRC accepts scans and photos for most paperwork. You don’t have to keep the paper original in a box. Good software stores the image against the transaction. That beats searching a drawer.
Digital storage has one trap. A folder of unnamed photos is hard to use. Name each photo so you can match it to its entry.
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 don’t let you skip the return. They change how you file it.
Rebuild what you can first. Banks reissue statements. Suppliers reissue invoices. Card processors export settlement reports going back years.
Then flag the gap on the return itself. Tell HMRC it’s an estimate. A hidden guess looks much worse.
What Does Poor Record Keeping Cost You?
Poor records cost money four ways. You lose expense claims, so you pay more tax. You make decisions on old numbers. You pay catch-up fees at year end. And if HMRC finds an error, weak records make a penalty more likely and larger.
Lost claims. No receipt means no claim. A £40 receipt you can’t find is a £40 cost you pay tax on.
Old numbers. Books that run three months behind show you last quarter, not today. You hire, buy stock or pay a dividend based on that cash. But it’s already gone.
Catch-up fees. A year of unsorted records is a project. Your accountant bills it by the hour, in January, at the busiest time of year.
HMRC penalties. HMRC’s factsheet on penalties for inaccuracies is clear. Take reasonable care and you pay no penalty, even if the return is wrong. HMRC names accurate records as an example of reasonable care.
Without that care, the penalty is a share of the extra tax:
| HMRC’s view of the error | Penalty range |
|---|---|
| You took reasonable care | No penalty |
| Careless | 0% to 30% |
| On purpose | 20% to 70% |
| On purpose, and you hid it | 30% to 100% |
These ranges apply when you tell HMRC first. If HMRC finds the error first, the minimums rise to 15%, 35% and 50%. Where you land inside a range depends on how much you help. Good records are the cheapest way to stay in the first row.
How Do You Know Your Records Are Slipping?
Most owners with weak records think their records are fine. Watch for five signs. The bank balance in your software doesn’t match the bank. Receipts sit in a pile. Personal and business spending share one account. Nobody has checked the books this month. Year end feels like a rescue job.
Bank matching is the first test. Your software balance should match your bank on the last day of each month. A gap means a missing or doubled entry.
Mixed spending is the second. Personal payments in a business account make it hard to prove what the business earned and spent. A company is a separate legal person, so its money belongs in its own account. Sole traders should split them too.
The third test is time. Ask how long it takes to answer “how much do customers owe us?” A minute is healthy. A day is a warning.
Getting Your Records in Order
Start with the separation. Keep a business bank account apart from your personal one.
Then pick a storage method and use it every week. Software that stores the receipt image against the transaction is the simplest option. Set a folder rule if you’re on a spreadsheet.
DASA’s outsourced bookkeeping service does the weekly recording and stores the proof against every entry. Tell us your business type and whether you’re VAT registered. Get a quote and we’ll send you our current pricing.
This article gives general information about UK business record keeping. It’s not financial, tax or legal advice. Every business is different. Speak to a qualified accountant about your own situation.
Last reviewed October 2026 by Raqeeb Marzook, ACCA.
Raqeeb Marzook is Manager at DASA Accountancy. He’s a qualified member of the ACCA. He has over five years advising UK small businesses, sole traders and company directors. His work covers bookkeeping, VAT, self assessment, payroll and business planning. He prepares articles from primary HMRC guidance. Found an error? Email info@dasaaccountancy.co.uk.
Frequently Asked Questions
How long do I have to keep business records in the UK?
Sole traders keep records five years after the 31 January 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 happens if I lose my business records?
Tell HMRC on the return. 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 not keeping proper accounting records, and a director can be disqualified. For payroll, HMRC can estimate what you owe and charge up to £3,000.
What does bad bookkeeping cost a small business?
Lost expense claims, decisions made on old numbers, catch-up fees and bigger HMRC penalties. HMRC charges no penalty for an error if you took reasonable care, and it names accurate records as reasonable care.
Do business records have to be digital?
More of them each year. VAT registered businesses keep VAT records digitally. Since 6 April 2026, sole traders and landlords with qualifying income over £50,000 must use Making Tax Digital for Income Tax. HMRC accepts readable scans and photos as proof.