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How long does a sole trader need to keep business records?
HMRC’s record-keeping rules
HMRC requires you to keep records for at least five years after the submission deadline of your tax return. Some records, like invoices related to capital assets, may need to be kept for up to six years.
What records you need to keep
• Sales invoices and receipts
• Purchase invoices and receipts
• Bank statements
• Mileage and travel logs
• VAT records (if registered)
A client of mine, a freelance photographer, keeps digital copies of all invoices and receipts. It makes Self Assessment painless and protects against HMRC enquiries.
Digital vs paper records
HMRC accepts both. Digital records are often easier to manage, especially when paired with accounting software. They reduce clutter and make searches faster.
Do sole traders need to file annual accounts?
Self-assessment vs company accounts
Sole traders do not file formal company accounts. Instead, you submit a Self Assessment tax return, detailing your profits and allowable expenses.
What you actually need to submit
• Total income
• Allowable expenses
• Profit calculation
• Any tax reliefs claimed
Deadlines to remember
• Tax year ends 5 April
• Online Self Assessment submission: 31 January following the tax year
• Paper returns: 31 October
Miss these deadlines, and you risk penalties — even for a small oversight.
Do sole traders need to file a confirmation statement?
Why confirmation statements apply only to companies
Confirmation statements (previously annual returns) are for limited companies to report details like directors, shareholders, and registered office.
What sole traders file instead
As a sole trader, you don’t submit a confirmation statement. Your main obligations are:
• Self Assessment
• VAT returns (if registered)
Key compliance differences
Understanding the difference is important: it prevents accidental filings and ensures you don’t waste time on unnecessary forms.
What accounting software is best for sole traders?
Free vs paid options
• Free options: Simple spreadsheets, FreeAgent free through certain bank accounts. Good for very small businesses.
• Paid options: QuickBooks, Xero, Sage — offer automation, invoicing, and tax reporting.
Features to look for
• Integration with bank accounts
• Automatic VAT calculations
• Expense tracking
• Reporting and profit/loss statements
Popular software choices
I often recommend:
• QuickBooks: Intuitive, with strong reporting tools.
• Xero: Flexible, scalable, good for growing businesses.
• FreeAgent: Great for UK sole traders, simple interface, integrates with HMRC.
Clients who invest in accounting software often save hours each week and reduce errors. Trust me — it’s worth the investment.
Final thoughts
Keeping accurate records and filing the correct accounts isn’t just about HMRC compliance — it’s about running a smarter business. Use digital tools, stay organised, and never underestimate the value of proper record keeping.
With the right habits, Self Assessment becomes simple, stress-free, and even insightful for business growth.
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