What Records Must You Keep for Self Assessment if You Use Cash Payments?

If you are a sole trader completing a Self Assessment tax return and you accept cash payments, it is important to keep accurate and detailed records. HM Revenue and Customs (HMRC) requires you to keep sufficient evidence of your income and expenses to complete your tax return correctly.

Types of Records to Keep

• Sales and Income Records: Keep a record of all cash received from your business activities. This can include a daily or weekly cash book, receipts issued to customers, or a sales ledger. For example, if you run a market stall and receive £50 in cash, note the date, amount, and nature of the sale.
• Expense Records: Keep receipts or invoices for all business expenses paid in cash. This helps you claim allowable expenses accurately. For instance, if you buy stock or supplies with cash, keep the till receipt or handwritten note showing the amount and purpose.
• Bank Statements: Even if you mainly use cash, any money you pay into or take out of your business bank account should be recorded and reconciled with your cash records.

Why Keeping Records Matters

HMRC expects you to keep records that are accurate and up to date. Good records make it easier to fill in your Self Assessment tax return and support your figures if HMRC asks for evidence. Without proper records, you risk mistakes or penalties.

How Long to Keep Records

You must keep your business records for at least 5 years after the 31 January submission deadline of the relevant tax year. For example, for the tax year ending 5 April 2024, keep records until at least 31 January 2030.

Practical Tips for Cash Record Keeping

• Use a dedicated cash book or spreadsheet to log cash received and paid out daily.
• Issue receipts for cash sales whenever possible, even if handwritten.
• Keep all receipts and invoices for cash expenses in a safe place, ideally organised by date.
• Reconcile your cash records regularly with your bank statements and any other records.

Exceptions and Additional Considerations

There are no special exceptions for cash payments—whether you receive payments by cash, cheque, card, or electronically, the requirement to keep accurate records remains the same. If your business is very small or you use a simplified accounting method, you still need to keep records that clearly show your income and expenses.

If you are unsure about the level of detail required or how to organise your records, HMRC provides guidance and you can seek advice from a professional accountant or tax adviser.

Official reference: https://www.gov.uk/self-assessment-tax-returns. Always check the latest official guidance. Related forms: Browse our form category.

Important: This article provides general information. Government rules, forms and procedures can change, and this article may not reflect the latest updates. Check current GOV.UK guidance or the relevant authority before relying on it. ITG & Co. is independent and is not affiliated with a government department.