Good record-keeping isn’t just good practice — for both sole traders and limited companies, it’s a legal requirement with specific minimum retention periods. Falling short isn’t just risky if HMRC asks questions; it can result in penalties even if your tax return itself was accurate.
Sole traders: what to keep
As a sole trader, you’re required to keep records that support your Self Assessment return, including:
- All business income — invoices, receipts, sales records
- All business expenses — receipts, bills, bank statements showing business transactions
- Records of any personal drawings taken from the business
- If VAT registered, records supporting your VAT returns
- If you employ anyone, payroll records
- Details of directors, shareholders, and company secretary (if any)
- Results of shareholder votes and resolutions
- Register of people with significant control
- Details of any charges (mortgages or loans secured against company assets)
- Money received and spent by the company, with details of what it related to
- Assets owned by the company
- Debts owed by or to the company
- Stock held at the end of the financial year, and the stocktakings used to work this out
- Goods bought and sold, with details of buyers and sellers (except for retail sales)
How long: Generally, at least 5 years after the 31 January submission deadline for the relevant tax year. In practice this means records can need keeping for up to 6 years from when they were created, since the deadline itself falls well after the end of the tax year they relate to.
Example: Records for the 2025/26 tax year (ending 5 April 2026) need to be kept until at least 31 January 2032 — 5 years after the 31 January 2027 filing deadline.
If HMRC opens an enquiry into a return, or you filed late, records may need to be kept for longer than the standard period until the enquiry is resolved.
Limited companies: what to keep
Companies have a broader set of record-keeping obligations, split between company records (kept for Companies House purposes) and accounting records (kept for HMRC purposes).
Company records include:
How long: Company records generally need to be retained for as long as the company exists, and certain historical records for a set period after any relevant event.
Accounting records include:
How long: At least 6 years from the end of the last company financial year they relate to — longer if the company’s transactions span more than one accounting period, or if HMRC has opened a compliance check.
Example: A company with a financial year ending 31 March 2026 needs to keep that year’s accounting records until at least 31 March 2032.
Penalties for inadequate records
For both structures, failing to keep adequate records can result in financial penalties, separate from any penalty for an inaccurate tax return. Poor records also make it much harder to defend a tax position if HMRC does query something — even if the underlying figures were correct, an inability to evidence them can leave you with little to argue back with.
Example (sole trader): A sole trader who can’t produce receipts to support claimed expenses during an HMRC check may have those expenses disallowed, increasing the tax owed, even if the expenses were genuinely incurred.
Example (limited company): A company that can’t evidence a significant transaction during a compliance check faces the same risk — the burden is on the business to substantiate what’s been declared, not on HMRC to disprove it.
Digital record-keeping
Both sole traders and limited companies are increasingly required to keep records digitally under Making Tax Digital, rather than in paper form or basic spreadsheets — the specifics depend on turnover and business type, and the rules have been phased in gradually, so it’s worth checking current requirements against your situation rather than assuming paper records remain sufficient.
The practical takeaway
| Sole Trader | Limited Company | |
|---|---|---|
| Minimum retention | 5 years after 31 Jan filing deadline | 6 years from end of financial year (accounting records); life of company for some company records |
| Kept for | Self Assessment | Companies House and HMRC |
| Format | Increasingly digital under MTD | Increasingly digital under MTD |
Whichever structure you’re in, the safest habit is treating “how long do I need this” as the default question when filing any business document, rather than working it out retrospectively when HMRC or Companies House asks.