What accounting records am I legally required to keep as a sole trader?

Understanding what “legally required” means for a sole trader

If you’re a sole trader, you don’t have the same statutory accounting record rules as a limited company, but you do have legal obligations to keep adequate records for tax and (where relevant) VAT, payroll, and other compliance areas. In plain English: you must be able to prove what you earned, what you spent, what you owe, and what you claimed—using records that are complete, accurate, and readable.

This matters for three big reasons. First, you need reliable numbers to complete your tax return (and any required updates if you’re in a digital reporting regime). Second, tax authorities can ask to see evidence for the figures you report. Third, good records protect you day-to-day: they help you chase unpaid invoices, control costs, and understand cash flow.

In this article, we’ll walk through the core accounting records a sole trader is typically required to keep, how long to keep them, and how to organise them without turning bookkeeping into a second job. We’ll also show how invoice24 (your free invoicing app) can make record keeping dramatically easier—so you spend less time sorting paperwork and more time getting paid.

Quick disclaimer on jurisdiction and professional advice

Record-keeping rules vary by country and sometimes by region. This guide is written for typical sole-trader requirements in the UK context (where “sole trader” and “Self Assessment” terminology is common). If you trade elsewhere—or you have a complex situation such as international VAT, staff payroll, regulated industry requirements, or multiple businesses—consider checking the guidance for your jurisdiction or speaking with an accountant. Even in the UK, special rules can apply depending on what you do and how you’re registered.

The core principle: keep enough to support every number on your tax return

As a sole trader, the key test is whether your records are sufficient to support the income and expense figures you report. That means you should be able to trace:

Income → from customer order or agreement → to invoice (or sales record) → to payment (bank/merchant statement) → to your books.

Expenses → from purchase/contract → to receipt or supplier invoice → to payment proof → to your books, with the business purpose clear.

If you can do that consistently, you’re already meeting the spirit of the law and making any future checks far less stressful.

Records you must keep for business income

Income records are about proving what you sold, when you sold it, and how much you received. The exact documents differ by business type, but most sole traders should keep:

Sales invoices (or equivalent sales records)

If you invoice customers, keep copies of every invoice you issue. A proper invoice trail is one of the cleanest ways to demonstrate income. Your invoices should clearly show who you billed, what you supplied, the date, the amount, and any tax information required (for example, VAT details if you’re VAT registered).

How invoice24 helps: invoice24 creates and stores your invoices in one place, so you can quickly search by client, date, invoice number, or status (paid/unpaid). That means you’re not digging through email attachments or scattered PDF folders when you need evidence.

Sales receipts and till records (for retail/cash sales)

If you run a shop, stall, café, or any cash-and-card retail setup, you need daily takings records. That might include Z-reads from a till, POS summaries, cash-up sheets, and merchant acquirer reports (card machine settlements). Even if you don’t issue an invoice for each sale, you still need a reliable method to track daily income.

It’s especially important to document how you handle cash—how you count it, when you bank it, and how you record any cash expenses paid directly from the till. Clean cash records reduce the risk of mistakes and the risk of your numbers being questioned.

Payment evidence

Keep records that show money actually arrived. Examples include bank statements, PayPal/Stripe/Square reports, marketplace payout reports, and remittance advices. For many businesses, the simplest approach is to keep monthly bank statements and match payments back to invoices or sales summaries.

Tip: If customers sometimes pay multiple invoices in one lump sum, note how you allocated the payment. A short note can save a lot of confusion later.

Credit notes and refunds

If you reduce an invoice, issue a refund, or agree a price adjustment, keep the supporting record—credit notes, email agreement, and proof of refund. These documents protect you by showing why sales were reduced and prevent mismatches between invoices issued and money received.

How invoice24 helps: Maintaining a clear invoice history makes it easier to document adjustments and keep an audit-friendly trail of what changed and why.

Records you must keep for business expenses

Expense records show what you bought, when you bought it, and why it was for business. The basic rule is: if you claim it, keep the evidence.

Supplier invoices and receipts

Keep purchase invoices, receipts, and bills for everything you claim as a business cost—materials, stock, tools, software subscriptions, phone bills (business portion), professional fees, advertising, training (where allowable), and so on.

Many sole traders fall into two traps here: (1) losing small receipts that add up over the year, and (2) keeping the receipt but not recording the business purpose. A plain receipt for “Card payment £48.90” might not be enough on its own if it’s not obvious what it was for. Add a short note if needed: “protective gloves for site work” or “printer toner for client invoices.”

How invoice24 helps: If your workflow is “do the work → invoice the client → record the expense,” it’s much easier to stay organised. Even if you store receipts elsewhere, invoice24 keeps the income side tidy and makes it simpler to reconcile what you spent against what you billed.

Bank and credit card statements

Statements are crucial because they corroborate payments. If you can, separate business and personal finances by using a dedicated business bank account. It’s not always legally required for a sole trader, but it’s one of the best ways to make your records clear and defensible.

If you use a personal account for business transactions, be prepared to identify which entries relate to the business and which don’t. That’s doable, but it can become time-consuming, especially if you have many transactions.

Petty cash records

If you use cash for small purchases, keep a simple petty cash log. Record the date, amount, supplier, and what it was for. Keep the receipts to back it up. Without a petty cash log, small transactions can become a messy “miscellaneous” category that’s hard to justify.

Travel and vehicle costs (including mileage)

If you claim business travel, keep evidence. What you need depends on how you calculate the claim:

If you claim actual vehicle costs: keep fuel receipts, servicing bills, insurance, road tax, finance/lease documents, and records showing the business/private split.

If you claim mileage: keep a mileage log showing date, start/end (or route), purpose, and miles/km. Mileage claims are common for sole traders because the paperwork can be simpler, but it still needs a credible log.

For public transport, keep tickets, booking confirmations, and receipts. For accommodation, keep invoices and a note of the business reason for the trip.

Home office and household expenses

If you work from home and claim a portion of household costs (or use a simplified method where permitted), keep the supporting information: bills for utilities, internet, rent or mortgage interest statements (where relevant to the method), and your calculation of the business portion. Also keep evidence of how many hours you work from home if your method depends on it.

Staff, subcontractors, and labour costs

If you employ staff, even as a sole trader, your record obligations expand. You may need to keep payroll records, payslips, tax and national insurance calculations, pension contributions if applicable, and details of statutory payments. If you use subcontractors (for example under a construction industry scheme), keep contracts, invoices, verification details, and any deduction statements required by your scheme.

Even if you do not employ staff, keep agreements and invoices for freelancers you hire—designers, photographers, virtual assistants, trades, and so on.

Records for assets, equipment, and long-term purchases

Not everything you buy is a day-to-day expense. Some purchases—like a van, expensive tools, machinery, or computer equipment—may be treated as capital assets for tax purposes depending on local rules and your accounting approach. You should keep:

Purchase invoice and proof of payment, finance agreements (if any), warranty documents, and details of any disposal or sale later (including sale invoice and proof of receipt). If you later sell or scrap an asset, keep evidence of what you got for it and when.

These records are important because asset treatment can affect your taxable profit, and you may need to refer back years later when you dispose of the asset.

Stock and inventory records (if you sell goods)

If you buy and sell goods, your profit depends on stock movements. Keep:

Purchase invoices for stock, records of stock on hand (especially at year-end), and any stock adjustments (write-offs, damaged goods, samples, staff use). If you hold significant inventory, doing a periodic stock count and saving the count sheet is a strong habit. It makes your accounts more accurate and reduces unpleasant surprises.

VAT records (only if you are VAT registered)

If you are VAT registered, your record-keeping obligations become more formal. In addition to your standard income and expense evidence, you’ll need to retain records that support your VAT returns, including:

VAT invoices you issue and receive (with required VAT information), a VAT account or summary showing output VAT and input VAT, import/export documentation where relevant, and evidence supporting any special VAT treatments (for example, reverse charge, zero rating, exempt supplies, partial exemption calculations, or margin schemes if you use them).

If you use accounting software or digital tools to maintain VAT records, keep them in a way that preserves their integrity. The main idea is that your VAT return should be traceable back to the underlying transactions without gaps.

How invoice24 helps: VAT-registered businesses often benefit from consistent invoice formatting and a clear invoice ledger. invoice24 helps you keep your sales invoicing structured, which is a major piece of your VAT evidence pack.

Records for online selling, marketplaces, and payment platforms

If you sell via marketplaces or platforms (for example, handmade goods platforms, booking platforms, app stores, or delivery services), your “sales” may be paid out net of fees, refunds, and chargebacks. Keep:

Platform sales reports, payout statements, fee summaries, refund/chargeback reports, and any tax documents the platform provides. These are essential to reconcile the gross sales figure with what actually hits your bank account.

Practical tip: Save reports periodically rather than assuming you’ll always be able to access old data. Platforms change dashboards, close accounts, or limit historical downloads.

Insurance, licences, and compliance documents

Depending on your trade, you may be required to hold certain insurance or licences. Even if not required, keeping them is wise. Examples include public liability insurance, professional indemnity, trade licences, safety certificates, and membership evidence for regulated work. These may not all feed directly into your tax return, but they can be legally required for your industry and extremely important if you face a dispute or claim.

Contracts, quotes, and job records

While not always thought of as “accounting” records, contracts and quotes can support your invoices and explain unusual transactions. Keep signed agreements, statements of work, accepted quotes, purchase orders, and change requests. If a client disputes an invoice later, having the paper trail can be just as valuable as the invoice itself.

How invoice24 helps: When your invoicing is consistent and professional, it reinforces your commercial documentation. invoice24 helps present a clear, branded invoice that matches what was agreed and reduces payment friction.

How long do you need to keep sole trader records?

Most sole traders need to keep records for a minimum number of years after the relevant tax filing deadline. In the UK, a common rule of thumb is that you keep your Self Assessment records for several years after the filing deadline for the tax year they relate to. VAT records often have their own retention period (commonly longer than a single tax year), and certain schemes or situations can extend how long you must retain documents.

You should also keep records longer if:

• you file late,

• your tax return is being checked or reviewed,

• you have ongoing disputes (customer, supplier, insurance),

• you buy and sell assets that might affect tax over multiple years,

• you have long warranties, finance agreements, or legal obligations tied to specific transactions.

A practical approach is to adopt a conservative retention policy: keep core tax records for the required period, and keep asset and legal documents for longer if they may still matter.

Paper vs digital: can you keep everything electronically?

In many cases, yes—electronic records are acceptable provided they’re complete, accurate, readable, and can be produced if requested. Digital records are often safer than paper because paper fades, tears, and disappears into drawers. Digital files can be backed up, searched, and organised.

That said, “digital” doesn’t just mean taking a photo and hoping for the best. A good digital system has:

• a consistent naming method (date + supplier/client + amount),

• folders or categories that match your bookkeeping,

• backups (cloud plus local, or two separate locations),

• access controls (especially if you store client details),

• a clear way to link income records (invoices) to payment evidence (statements).

Where invoice24 fits in: The fastest way to make your records “findable” is to keep your invoicing history in one place. invoice24 is built for exactly that—creating, sending, and storing invoices so you always have a clean sales ledger ready when you need it.

What you must record (not just keep): the minimum data you should capture

Keeping a pile of documents is not the same as keeping records. A solid record-keeping system captures the key information from each transaction. At minimum, aim to record:

For income: date, customer, description, amount, invoice number (if applicable), payment status, and method of payment.

For expenses: date, supplier, category, description/purpose, amount, and whether any tax element applies (for example VAT if relevant).

For assets: purchase date, cost, description, and disposal details later.

The more consistently you capture these, the easier your year-end becomes—and the easier it is to spot issues like unpaid invoices or overspending.

Common record-keeping mistakes (and how to avoid them)

Mistake 1: Mixing personal and business transactions

When your business is small, it’s tempting to run everything through a personal account. The problem is that it makes your records hard to defend and time-consuming to reconcile. Consider a dedicated business account and a dedicated business card as early as you can.

Mistake 2: Not keeping proof for “small” expenses

Small purchases add up. A £6 parking fee, a £12 tool part, a £9.99 subscription—do that a few times a week and you’ve got meaningful costs. If you claim them, keep evidence.

Mistake 3: Relying on bank statements alone

A statement shows money in and out, but it doesn’t always show what the transaction was for. You still need receipts, invoices, and notes that explain the business purpose.

Mistake 4: Leaving bookkeeping until the end of the year

Year-end “shoebox accounting” is stressful, error-prone, and often more expensive if you pay someone to untangle it. A weekly routine beats an annual panic every time.

How invoice24 helps: If you invoice as you go, you automatically build your sales records throughout the year. That single habit reduces the end-of-year workload massively.

Mistake 5: Poor naming and filing of digital files

“receipt1.jpg” is not a record-keeping strategy. Use a consistent naming convention and store files in logical folders. Future you will be grateful.

A simple, sustainable system for sole trader record keeping

Here’s a straightforward system that works for many sole traders:

1) Keep invoicing centralised. Use one app for invoices so you have a complete list of what you billed and when. invoice24 is designed for this—free, simple, and focused on getting you paid.

2) Reconcile monthly. Once a month, review your bank and payment platform statements. Make sure every payment matches an invoice or sales record, and every expense has evidence.

3) File as you go. Store receipts and supplier invoices in a monthly folder structure. Add short notes for anything non-obvious.

4) Track mileage and home working routinely. Don’t rely on memory. A small weekly update is easier than rebuilding a year of travel.

5) Keep year-end checks simple. Confirm unpaid invoices, confirm major expenses, confirm stock if relevant, and export summaries for your tax return or accountant.

How invoice24 supports better compliance and easier tax time

invoice24 is built to reduce the friction that usually causes record-keeping problems: delays, inconsistency, and missing paperwork. When invoicing is quick and standardised, you naturally keep better sales records. That has knock-on benefits:

• You can see what’s been billed and what’s overdue without guesswork.

• You can find any invoice quickly if a client asks questions or if you need evidence.

• You can reduce admin time and focus on work that actually earns money.

• You create a professional paper trail that supports your income figures.

Even if you use other tools for expenses or tax filing, keeping your invoicing clean and consistent with invoice24 gives you a strong foundation for the rest of your records.

Do you need an accountant if you keep good records?

Many sole traders can complete basic bookkeeping and invoicing themselves, especially early on. Whether you need an accountant often depends on complexity (VAT, staff, multiple income streams, property, international work) and how comfortable you are with tax rules.

What’s always true is this: better records reduce the cost and stress of professional help. If your invoices are organised, your statements reconcile, and your receipts are filed, an accountant can focus on advice and accuracy rather than detective work.

Checklist: the accounting records a sole trader should keep

Use this as a practical checklist:

Income records

• Sales invoices (or sales summaries if not invoicing)

• Cash-up sheets / POS summaries (if applicable)

• Bank statements and payment platform reports

• Credit notes, refunds, chargebacks evidence

Expense records

• Supplier invoices and receipts

• Bank/credit card statements

• Petty cash log and receipts

• Travel receipts and/or mileage log

• Home working bills and calculation notes (if claimed)

Business structure and compliance

• Insurance documents (public liability, professional indemnity, etc.)

• Licences/certificates relevant to your trade

• Contracts, quotes, purchase orders, job records

Assets and stock (if relevant)

• Asset purchase invoices, finance agreements, disposal records

• Stock purchase invoices and stock count records

VAT/payroll (if applicable)

• VAT invoices issued/received and VAT summaries

• Payroll records, payslips, submissions, and employer documentation

Final thoughts: aim for “clear, complete, findable”

You don’t need to be a bookkeeping expert to meet your legal record-keeping obligations as a sole trader. The goal is simply to keep records that are clear, complete, and easy to find—so your tax return is accurate and you can answer questions confidently if you’re ever asked.

If you want one change that delivers outsized benefits, start with invoicing. When your invoicing is consistent, your income records become reliable overnight. That’s why so many sole traders choose to centralise invoicing in invoice24: it’s free, straightforward, and built to help you send professional invoices, track what’s been paid, and keep your sales history organised all year round.

Strong records don’t just keep you compliant—they help you run a healthier business. And the best record-keeping system is the one you’ll actually stick to.