What Records Do I Have to Keep from Day One?

Starting a business means keeping accurate records from day one. Find out what to record, how long to keep it, and how to stay organised and compliant.

Introduction

When you start a new business, it can be tempting to focus entirely on sales, marketing, and product development. However, one of the most important parts of running a compliant and successful business is keeping proper records from day one.

Good record keeping is not just about satisfying HMRC or Companies House. It helps you understand how your business is performing, stay organised, and avoid costly mistakes when filing your tax returns. This article explains which records you need to keep from the moment you start trading, how long to keep them, and the best ways to stay on top of your paperwork.

Why Record Keeping Matters

Accurate business records are essential for:

  • Proving income and expenses to HMRC if you are audited

  • Preparing your tax return or company accounts correctly

  • Managing cash flow and understanding profitability

  • Supporting funding or loan applications

  • Avoiding penalties for late or incorrect filings

HMRC can ask to see your records at any time, so keeping them organised from day one saves stress later.

Financial Records You Must Keep

From the moment your business starts trading, you need to keep detailed records of all financial activity. These include:

  1. Sales and Income
    Record every sale you make, including the date, amount, customer name, and method of payment. Keep copies of invoices or receipts for all transactions.

  2. Purchases and Expenses
    Keep receipts, supplier invoices, and statements for anything you buy for the business. This includes materials, stock, office supplies, marketing costs, travel, and equipment.

  3. Bank and Credit Card Transactions
    Save monthly statements and make sure business and personal spending are kept separate. If you are a sole trader using one account for both, you must clearly identify business-related transactions.

  4. VAT Records (if registered)
    If you are VAT registered, you must keep VAT invoices, receipts, and records of all VAT returns submitted. You must also store digital copies if you are under the Making Tax Digital (MTD) rules.

  5. Payroll Records (if you employ staff)
    Maintain records of employee details, payslips, PAYE submissions, pension contributions, and holiday entitlements. HMRC requires these for at least three years after the tax year they relate to.

  6. Petty Cash Records
    If you handle small cash purchases, keep a log of every payment and attach receipts where possible.

  7. Mileage and Travel Logs
    Record dates, destinations, and distances for all business travel. Keep fuel receipts and note whether the vehicle is company-owned or personal.

Business Formation and Legal Records

You must also keep certain non-financial documents that relate to how your business is set up and managed.

  • Company formation documents: If you run a limited company, retain your certificate of incorporation, memorandum and articles of association, and share certificates.

  • Director and shareholder details: Keep up-to-date registers of directors, shareholders, and their shareholdings.

  • Business insurance: Store copies of all insurance policies, including public liability, professional indemnity, or employer’s liability insurance.

  • Contracts and agreements: Keep copies of contracts with clients, suppliers, and employees, as well as any leases or loan agreements.

Tax and Accounting Records

To stay compliant with HMRC, the following must also be retained:

  • Copies of tax returns and supporting documents

  • Corporation Tax computations (for limited companies)

  • Dividend vouchers and board meeting minutes (if applicable)

  • Annual accounts and confirmation statements submitted to Companies House

If you are self-employed, you must also keep records of:

  • Self Assessment returns

  • Class 2 and Class 4 National Insurance contributions

  • Any correspondence from HMRC about tax queries or changes

Digital Record Keeping

Under Making Tax Digital, many businesses must keep digital records of income and expenses and submit VAT returns electronically. Even if you are not yet required to use MTD, going digital makes life much easier.

Cloud-based software such as Xero, QuickBooks, or FreeAgent can automatically import bank transactions, store digital receipts, and generate reports. HMRC accepts digital copies of invoices and receipts, so there is no need to keep boxes of paper.

How Long to Keep Records

The length of time you must keep your records depends on your business type:

  • Sole traders and partnerships: Keep records for at least five years after the 31 January submission deadline for the relevant tax year.

  • Limited companies: Keep records for six years from the end of the last company financial year they relate to, or longer if:

    • The company has bought assets expected to last more than six years

    • A tax return is under investigation

    • You have carried losses forward to future years

If you employ staff, keep payroll records for at least three years after the end of the tax year they cover.

Common Record-Keeping Mistakes to Avoid

  • Mixing business and personal expenses in the same bank account

  • Failing to record cash sales or small purchases

  • Throwing away receipts after recording them

  • Ignoring digital record-keeping requirements under MTD

  • Leaving record organisation until year-end

Small errors can lead to HMRC challenges or missed tax deductions. Consistency and organisation are key.

Example Scenario

Imagine Jack, who starts a small plumbing business. In his first few months, he pays suppliers in cash, uses his personal bank card for fuel, and forgets to record a few cash jobs. When it is time to complete his first tax return, his records are incomplete, and his accountant must estimate several figures.

If HMRC later queries the return, Jack could face penalties for poor record keeping. By contrast, if he had used bookkeeping software and kept digital receipts, his accounts would have been accurate and stress-free.

How Your Accountant Can Help

A good accountant will help you:

  • Set up an organised system for record keeping

  • Recommend suitable software for your business

  • Train you on how to record income and expenses correctly

  • Review your records periodically to ensure compliance

  • Prepare tax returns and financial statements efficiently

Setting up good habits early means fewer errors and less hassle when tax deadlines arrive.

Best Practices for Staying Organised

  • Open a separate business bank account immediately

  • Scan or photograph receipts as soon as you get them

  • Review your accounts weekly to stay up to date

  • Store all digital records in one secure location

  • Back up files regularly, either to the cloud or an external drive

These small steps make year-end reporting faster and more accurate.

Conclusion

From the day your business starts trading, you must keep accurate records of all income, expenses, and legal documents. Proper record keeping helps you manage cash flow, file taxes accurately, and avoid HMRC penalties.

Whether you are self-employed or running a limited company, good organisation from the beginning will save time, reduce stress, and make your accountant’s job easier.

If you are unsure what to record or how to store it, speak to your accountant. They can set up a simple system tailored to your business so that you stay compliant and confident from day one.