Bookkeeping for sole traders, landlords and limited companies

What the law requires you to keep

The records a business must keep, and for how long, depend on how it is set up.

Limited companies

A company must keep records of:

• all money it receives and spends
• the assets it owns
• debts it owes and debts owed to it
• stock at the year end, and the stocktakes used to value it
• goods bought and sold, and who from and to (unless it is a retail business)

They are kept for 6 years from the end of the last financial year they relate to. Some must be kept longer: records that cover more than one accounting period, records for an asset expected to last more than 6 years, or records for a period where the return was filed late or HMRC has opened a compliance check. HMRC can fine a company up to £3,000 for failing to keep accounting records, and a director can be disqualified.

Sole traders and landlords

Sole traders and landlords keep records of business or property income and expenses, as well as personal income for Self Assessment. Typical records include sales invoices, receipts, bank statements, rent records and mileage logs for business journeys. They are kept for at least 5 years after the 31 January filing deadline for the tax year. If a return is filed very late, the period can be longer.

Making Tax Digital

VAT, in force now

Every VAT-registered business must keep its VAT records digitally and file returns through compatible software, unless HMRC has granted an exemption. Where more than one piece of software is used, they must be digitally linked. Copying and pasting between them does not count. See VAT returns.

Income Tax, being phased in

Making Tax Digital for Income Tax applies to sole traders and landlords according to their qualifying income, which is total self-employment and property income before expenses. Employment income, dividends, pensions and an individual’s share of partnership profits do not count.

Anyone within it keeps digital records, each showing the date, amount and category, and sends quarterly updates from software. Each update covers the tax year to date:

A business whose accounting year runs from 1 April to 31 March can choose calendar periods ending on the last day of the month instead. The tax return is still filed after the year ends. For 2026-27, HMRC is not giving penalty points for late quarterly updates, but late tax returns still attract them. HMRC’s eligibility checker shows when each person needs to start.

What good bookkeeping involves

Complete records come from a routine, not from a scramble at the year end. For a typical small business, that routine includes:

• Bank reconciliation. Every bank, card and loan account is matched to the records, so each payment is explained and nothing is counted twice.
• Sales ledger. Invoices are recorded and payments matched, so you know who owes what and how long it has been outstanding.
• Purchase ledger. Supplier bills are recorded and tracked, so you know what is due and when.
• VAT coding. Each transaction gets the right VAT treatment, so that the return is a summary of records already checked.
• Payroll journals. Wages, PAYE, National Insurance and pension contributions are posted from the payroll reports, along with the amounts owed to HMRC and the pension provider.
• Month-end. Accruals, prepayments and depreciation are posted, and the director’s loan account is kept current.

Cloud bookkeeping

Cloud bookkeeping software, in packages such as Xero or QuickBooks, brings in bank transactions through daily feeds and captures receipts from a phone photo. Software speeds up data entry, but it does not decide whether a payment is a cost, an asset or a director’s drawing. That still needs someone who understands the business and the tax rules.

Management information

Up-to-date books can tell you more than the year-end accounts. From the same records we can prepare:

• a monthly or quarterly profit and loss account and balance sheet
• aged lists of who owes you money and whom you owe
• the cash position and the VAT, PAYE and Corporation Tax bills coming up
• comparisons with the previous period or a budget, where you keep one

If you want to automate the finance workflows around the books, such as invoice approval, expense capture or reporting packs, our sister business Linx Automate works on finance and operations automation.

What we do

• Keep your books monthly or quarterly, reconciled to every bank and card account.
• Code transactions for VAT and prepare figures for VAT returns and Making Tax Digital updates.
• Post payroll journals and maintain the director’s loan account.
• Produce management reports on the timetable you choose.
• Hand over a clean ledger at the year end for the accounts and tax returns.

What we need from you

• Access to your bank and card statements, or a bank feed.
• Sales invoices, supplier bills and receipts, as they arrive.
• Notice of anything unusual, such as a new loan, an asset purchase or money introduced personally.
• Answers to our queries on transactions we cannot identify from the records.