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A Guide To Record-Keeping And Expenses For The Self-Employed

If you’re new to self-employment, record-keeping might sound like hard work – even for those who have been filing for years it can be daunting. While that may be true, it does come with its own reward – namely, that sole traders can claim back allowable expenses and pay less tax on their earnings.

Written exclusively for Expat Network Mike Parkes from GoSimpleTax

HMRC has a number of rules about record-keeping though. Mostly, they relate to the storage of receipts and other documentation after you’ve filed your Self Assessment tax return for that tax year. By not adhering to them, you run the risk of losing out on any tax relief – or worse, being penalised by HMRC.

So, to ensure you get the tax-saving benefit of expenses Mike Parkes from GoSimpleTax sets the record straight on record-keeping and provide guidance on how to claim.


What expenses can sole traders claim for?

There’s a whole host of expenses you can claim as a sole trader, and they can potentially net you big savings if you utilise all that are available to you. Generally, people are aware that travel (aside from commuting) and equipment purchases qualify as expenses, but there are many others.

They include:

Legal and financial costs

If you need to hire an accountant to support you in your venture, you can claim on their total costs. This may also be the case for any other professional services you may need for business purposes. Likewise, you can claim against bank costs such as overdraft and credit card charges.

Marketing costs

As you are using these services purely for the purpose of driving your business forward, HMRC will permit marketing exercises as eligible expenses. That’s great news for sole traders who use flyers to drum up work, for example, or need a website that advertises their services.


If you work from home, you’re entitled to claim a proportion of your gas, electric, water, broadband and telephone bills as allowable expenses. There’s no exact science to this, but generally you’d divide the bill by the number of rooms in your house and then divide that figure based on the amount of time you work from home. The GOV.UK website has a good example. If that sounds too complex, then you can claim simplified expenses.


If your freelance work requires you to pay a membership fee or would benefit from you purchasing a trade publication, these costs can be claimed back on. However, this does not extend to political party subscriptions.

These are just some of the examples of expenditure that you can claim on, but they highlight the wealth of opportunities available to all sole traders – provided they keep the relevant records.


What records should I keep?

In order to qualify for tax relief, you need to be able to present receipts when asked by HMRC. But to be wholly compliant, expenses aren’t the only figures you’ll need to report. In fact, if you’re self-employed, you’re legally required to keep records of the following:#

  • All sales and income
  • All business expenses
  • VAT records if you’re registered for VAT
  • Records about your personal income
  • Your COVID-19 support grant

You won’t need to submit all of the above as part of your Self Assessment tax return. However, HMRC may ask you for them should they launch an investigation. Additionally, it helps you to work out your taxable income when you’re filing.


If HMRC does launch an investigation, you’ll need to provide evidence of your finances. This will need to come in the form of:

  • Receipts for goods and stock
  • Bank statements and chequebook stubs
  • Sales invoices, till rolls and bank slips

Only with all of the above will you be able to safely claim any relevant expenses and stay on the right side of the taxman.


How long should I keep these records for?

Where businesses have to store receipts for six years, sole traders are only required to store theirs for five. That’s at least five years after the 31st January submission deadline of the relevant tax year.

This allows HMRC to investigate your accounts over a long period of time should they believe it necessary. Obviously, if you have claimed relief but misplaced the evidence, you may be penalised by HMRC all the same. So it’s best to invest in more than a wallet or a desk drawer for your receipts.


Where should I store records?

Ideally, electronically. Train tickets and similar paper receipts are near impossible to keep in good quality for that length of time – especially if you’re lugging them around for up to five years in your coat pocket. You could have a physical filing system, but the amount of admin that would be required to keep it in order could quickly get exhausting.

Tax software, on the other hand, allows you to store certain documentation online. Some allow users to take photos of receipts from their phone, for instance. They can then upload the image to the app, keeping it secure in case you ever find yourself under investigation.

However, it’s worth bearing in mind that there are documents that HMRC will expect you to hold on to in their original form. Such documents usually show that you’ve had tax deducted. For example, if you’ve been an employee in that tax year, your P60 will prove your exemption.


About GoSimpleTax

GoSimpleTax is one such record storage solution. Yet it also does so much more. This Self Assessment tax return software alerts users to opportunities where they can lower their tax liability.

As you input your income and expenditure, GoSimpleTax points out where you may be able to make savings alongside filling in your tax return with the information you supply. Consequently, you can have an up-to-date view of your accounts at all times, and a forecast of your total Income Tax bill.

You can start using GoSimpleTax today completely free of charge – it won’t cost you a thing until you want to attach copies of receipts and invoices, or file your SA100 directly to HMRC. Sign up today and see first-hand how award-winning accounting software can help you.