What financial records do freelancers need to keep?

Understanding what your record-keeping and tax requirements are as a freelancer is very important.

While you don’t need to send your records in when you submit your tax return, you do need them so you can work out your profit or loss for your tax return and produce them to HMRC if asked to do so.

You must ensure your records are accurate. It’s extremely important to keep clear records of all income over the course of the year, what is was for, who it was from and whether any tax has been paid.

A lot of time can be wasted on keeping records that simply are not required, time that could be better spent on other aspects of running your business. Our friends at GoSimpleTax have written the following guide to ensure you are fully up to date on the records you need.

Documents and Information Checklist

To fill in your tax return, you will need information regarding the following:

National Insurance Number
Unique Taxpayer Reference number or UTR
Activation PIN – when registered to the Government Gateway allowing you access to HMRC online services.
Company/partnership name, address and company number if relevant
Your P45
Your P60
Your P11D
Your business’s annual income and expenditure
Income earned from other employment
Any rent you have received
Interest paid on loans, credit cards or other credit
Income from overseas
Income received from a partnership
Any dividends received
Benefits received either from the state or an employer
Capital gains received
Gift Aid received
Pension contributions
Tax payments you’ve already made this year (payments on account)

You may also need:

Certificates detailing interest you’ve received from your bank
All expenses receipt’s
Your P2 coding notice

Know which expenses you can claim

Many taxpayers don’t know the true extent of what they are able to claim as a legitimate business expense. They can differ in relevance depending on your line of work, but leases, equipment purchase, software, training courses and more can be classed as allowable expenses, and each come with their own rules for validation.

Elsewhere, broader expenses can be claimed – there are tax breaks for vehicle mileage costs, home working bills and overnight accommodation.

Keep proof of all receipts for goods and stock. Bank statements, cheque book stubs, sales invoices, till roll and bank slips.

We suggest using a mobile tracking tool to collate everything over the financial period.

If you’re using traditional accounting

As well as the standard records, you’ll also need to keep further records so that your tax return includes:

What you’re owed but have not yet received (debtors)
What you’ve committed to spending but have not paid out yet, for example, you’ve received an invoice but have not paid it yet (creditors)
The value of stock and work in progress at the end of your accounting period
Your year-end bank balances
How much you’ve invested in the business in the year
How much money you’ve taken out for your own use

More on freelancer expenses and need to know tax information for freelancers.