Record-keeping for sole traders: sales and purchase records

What the rules actually require

Neither HMRC nor the IRS prescribes a particular book or spreadsheet. What they ask for is records that let you, or them, trace every figure on your tax return back to a document.

HMRC lists what a self-employed person must keep records of: all sales and income, all business expenses, VAT records if you’re registered for VAT, PAYE records if you employ people, and records about your personal income. As proof, it names receipts for goods and stock, bank statements, chequebook stubs, sales invoices, till rolls and bank slips.

The IRS is just as practical. For gross receipts it lists cash register tapes, deposit information for cash and credit sales, receipt books, invoices and Forms 1099-MISC. For purchases and expenses, the documents should identify the payee, the amount paid, proof of payment, the date and a description showing it was for the business. The IRS adds that everything that applies to paper records applies to electronic ones too.

So the job is simple to describe: one line per transaction, one document per line, and nothing missing.

The sales record: columns that do the work

A useful sales record has six columns:

For small cash sales, such as a market stall or a hair salon, you don’t need a line per customer. A daily takings line backed by a till roll or a tally sheet does the job, as long as cash and card are kept on separate lines so the card total can be matched to your payment provider.

Here’s a month for Priya, who makes candles in Bristol and sells at markets, online and to a café.

SALES RECORD — Priya Shah t/a Wick & Wild — October 2026

Date    Customer / source          What for              Document      Method   Amount
03/10   St Nicholas Market         Daily takings         Tally 03/10   Cash     146.00
03/10   St Nicholas Market         Daily takings         Card report   Card      88.00
09/10   The Corner Café            Candles for tables    F-2026-014    Bank     240.00
17/10   St Nicholas Market         Daily takings         Tally 17/10   Cash     122.00
17/10   St Nicholas Market         Daily takings         Card report   Card      96.00
24/10   Mrs Okafor                 Wedding favours       F-2026-016    Bank     180.00

Total October                                                                  872.00
Cash 268.00 · Card 184.00 · Bank 420.00

If you sell through a platform that pays you after deducting its fees, record the gross sales as income and the fees as an expense, using the platform’s monthly statement as your document. Recording only the net payout understates both sides.

The purchases and expenses record

Same logic, from the other side: date paid, supplier, what for, document, method, amount. Add a category column (stock, materials, travel, fees, phone) because that’s how the figures end up on a tax return.

PURCHASES AND EXPENSES — Priya Shah t/a Wick & Wild — October 2026

Date    Supplier            What for            Category    Document        Method   Amount
02/10   WaxWorks Ltd        Soy wax, 20 kg      Materials   Inv. WW-4471    Card     164.50
12/10   Jar Depot           Glass jars          Materials   Inv. 88213      Bank      96.00
20/10   Bristol Markets     Pitch fee           Fees        Receipt 0457    Cash      35.00

Total October                                                                        295.50

Two habits keep this list honest:

1. Write the business reason when it isn’t obvious. A £35 cash payment means nothing in a year; “pitch fee, St Nicholas Market” does. The IRS makes this point directly: proof of payment alone doesn’t show the cost was for the business.
2. Keep personal spending out. If a cost is partly personal, like a phone, decide your split once and apply it every month. Our guide on how to separate personal and business records covers mixed costs in detail.

Cash basis or traditional: which date do you write?

GOV.UK describes the two methods plainly. Under cash basis, you record income or expenses when you receive money or pay a bill. Under traditional accounting, you record them by the date you invoiced or were billed. Cash basis has been the default for UK sole traders since the 2024 to 2025 tax year.

In the example above, Priya invoiced The Corner Café on 30 September and was paid on 9 October. On cash basis, the sale goes in October. On traditional accounting, it belongs to September, and at the year end she’d also list what customers still owe her and what she owes suppliers.

US sole proprietors also choose an accounting method, usually cash for small businesses. Whichever you use, stick to it: switching dates halfway through a year is how income gets counted twice or not at all.

How long to keep everything

The IRS extends the period to 7 years if you claim a loss from worthless securities or a bad debt deduction, to 4 years for employment tax records, and indefinitely if you didn’t file or filed a fraudulent return. In the UK, if records are lost and can’t be replaced, GOV.UK says to do your best to provide figures and tell HMRC when you file if you’re using estimated or provisional figures.

Paper receipts fade. Our guide on how to photograph a readable receipt explains how to keep a copy you can still read in five years.

Making Tax Digital: when a notebook is no longer enough

Making Tax Digital for Income Tax changes the format, not the substance. If your qualifying income from self-employment and property is over the threshold, you must keep digital records in compatible software and send quarterly updates to HMRC. The timetable on GOV.UK:

The columns in this article are exactly what that software needs. If you’re heading towards the threshold, keeping clean records now makes the switch a matter of importing, not rebuilding.

A ten-minute weekly routine

Logging records as they happen in Binome360

Records go missing when writing them down means opening a laptop. In Binome360 you log income or an expense in a sentence or by voice, on the account it belongs to (cash, bank or mobile money, kept by hand). A separate assistant for the business keeps work money apart from personal money.

Invoices you create in Binome360 can be marked as paid when the money arrives, and overdue ones are flagged. Exports let you pass everything to your accountant or copy it into your tax software. Binome360 is not accounting software and not Making Tax Digital software, and it doesn’t replace professional advice.

Frequently asked questions

What records does a sole trader need to keep?

In the UK: all sales and income, all business expenses, VAT and PAYE records if they apply, and records of personal income, backed by receipts, invoices, bank statements and till rolls. In the US: documents that support every figure on your return, showing payee, amount, date, proof of payment and business purpose.

Can I keep my records in a spreadsheet?

Yes, unless you’re within Making Tax Digital, where you need compatible software (a spreadsheet can still work with bridging software). The IRS applies the same rules to electronic records as to paper ones.

Do I need to keep paper receipts?

A clear, complete copy is usually enough for tax records, but keep originals for anything under warranty or unusually large, and check your country’s rules before throwing originals away.

How long should I keep business records?

UK sole traders: at least 5 years after the 31 January deadline for the tax year. US: generally 3 years from filing, 6 years if you under-reported income by more than 25%, 7 years for bad debt or worthless securities claims, 4 years for employment tax records.

In short

Two lists, one line per transaction, one document per line: that’s record-keeping for a sole trader. Pick cash basis or traditional accounting and stick to it, keep everything for the required period, and update weekly. First step: create the six columns above and enter every payment you’ve received since the first of this month.

Sources

• GOV.UK, “Business records if you’re self-employed”: overview, “What records to keep” and “How long to keep your records”: gov.uk/self-employed-records.
• GOV.UK, “Check if you’re eligible for Making Tax Digital for Income Tax” (thresholds and start dates): gov.uk.
• GOV.UK, “Use Making Tax Digital for Income Tax” (digital records, quarterly updates): gov.uk.
• IRS, “What kind of records should I keep”: irs.gov.
• IRS, “How long should I keep records?”: irs.gov.

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