Good record-keeping is a legal requirement for all UK businesses, not just an accounting best practice. Many new founders underestimate the types of records they need to retain — which can cause problems if HMRC requests documentation, an accountant needs to reconcile accounts, or a dispute arises with a supplier or client.
Sole traders must keep records of all sales and income, business expenses, and any VAT-related records if registered. Limited companies must retain company accounts, statutory registers, directors' details, shareholder information, and minutes of key decisions, in addition to all financial and tax records. HMRC specifies minimum retention periods that vary by record type — financial records must typically be retained for several years after the relevant tax year, and certain statutory company records must be maintained for the life of the business.
The specific records required vary depending on your business structure and whether you are VAT-registered. Getting into good habits early makes tax returns easier to prepare and protects you if HMRC ever queries your accounts. Our guides to sole trader accounting and limited company record-keeping explain what to retain and how to organise it.