Accurate and up-to-date accounting records are essential for every business, whether you are a sole trader, partnership, or limited company. Proper records help you monitor your performance, prepare accounts, meet legal obligations, and ensure that tax returns are correct and compliant.
Keeping proper accounting records is not just good practice — it is a legal obligation. Accurate records help you:
Prepare timely and accurate financial statements
Calculate taxable profits and submit correct tax returns
Monitor cash flow and business performance
Support claims for allowances and reliefs
Respond effectively to enquiries from tax authorities
Failing to maintain adequate records can lead to errors, penalties, and lost opportunities for legitimate tax relief.
Your accounting records should include:
Details of all sales and receipts
Invoices issued to customers
Cash register summaries (if applicable)
Supplier invoices
Receipts for business expenses
Bank and credit card statements
Records of business assets (plant, equipment, vehicles)
Loans, overdrafts, and other liabilities
Employee wages and deductions
PAYE and National Insurance information
Pension contributions
Records of stock and inventory (if applicable)
Details of any bad debts written off
Records supporting claims for reliefs or exemptions
Keeping these records in a consistent and systematic way makes preparing accounts and tax returns much simpler.
Different records may need to be kept for different periods, but as a general guide:
Self-employed and partnerships: at least 5 years after the submission deadline for the relevant tax return
Limited companies: generally at least 6 years
Payroll records: at least 3 years from the end of the tax year they relate to
These periods ensure that you can support figures in your accounts and tax returns, especially if your records are reviewed or inspected.
Digital record-keeping is now widely accepted and often preferable. Digital systems:
Improve accuracy
Allow easier retrieval of information
Integrate with accounting and tax software
Support Making Tax Digital requirements
If you choose to keep electronic records, ensure that they are backed up and stored securely.
Your accounting records are the basis for preparing business accounts. Well-kept books mean:
Accounts can be prepared with fewer errors
Tax calculations are accurate
Deadlines are easier to meet
For limited companies, statutory accounts must meet specific reporting standards and formats.
Avoid these frequent pitfalls:
Failing to keep receipts or losing key documents
Mixing personal and business finances
Not updating records regularly
Relying solely on memory rather than written records
Regularly updating your records reduces stress at year-end and improves overall financial control.
Setting up a robust system from the start will save time and avoid issues later. Applegrow can help you:
Establish efficient record-keeping processes
Choose appropriate software or systems
Train staff on good record practice
Review and organise existing records
Prepare accounts and tax submissions from your records
Good accounting records are the backbone of a successful business. Applegrow provides practical support to ensure your records are accurate, compliant, and useful for decision-making.
A capital gain arises when a chargeable asset is sold for more than its original cost. The gain is calculated as:
Sale proceeds (less selling costs)
minus
Purchase price (including acquisition costs)
CGT applies to assets such as shares, business assets, investment property, and certain personal possessions.
For the 2025/26 tax year, CGT rates depend on your total taxable income and gains:
18% on gains that fall within the basic rate income tax band
24% on gains above the basic rate band
These rates apply to most assets, subject to specific exceptions and reliefs.
Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) can significantly reduce CGT on qualifying business disposals.
For 2025/26:
Qualifying gains are taxed at an effective rate of 14%
The lifetime limit for BADR is £1 million
The rate will increase to 18% from 2026/27
BADR may apply to:
The sale of a sole trade or partnership business
Shares in a personal trading company
Assets used in a business that has ceased within the last three years
Associated disposals (such as personally owned property used in a business) may also qualify, although restrictions can apply, particularly where rent has been charged.
To qualify for BADR on company shares:
You must have been an employee or director
You must hold at least 5% of ordinary share capital
You must hold at least 5% of voting rights
Additional distribution or proceeds tests must be met
The qualifying ownership period is two years leading up to the date of disposal.
Where a shareholder’s holding falls below 5% due to fundraising through new share issues, BADR may still be protected. An election can be made to crystallise the gain before dilution, with the option to defer tax until the shares are actually sold.
This area requires careful planning.
Investors’ Relief is designed for external investors in unlisted trading companies.
Key conditions include:
Shares must be newly issued for cash
The company must be unlisted and trading
Shares must be held for at least three years
The CGT rate under Investors’ Relief is:
14% for 2025/26
Increasing to 18% from 2026/27
The lifetime limit for IR is £1 million.
Each individual can realise gains up to the £3,000 annual exemption (2025/26) without paying CGT. Couples should consider planning disposals jointly to maximise the use of both exemptions.
Shares of the same class in the same company are treated as one pooled asset. However:
Same-day transactions are matched first
Purchases within 30 days after disposal are matched next
Remaining shares are matched from the pooled holding
These rules are designed to prevent short-term tax planning.
Additional reliefs may include:
Private Residence Relief
Business Asset Rollover Relief
Gift Holdover Relief
Offset of carried-forward capital losses
Some disposals, such as those involving EIS, VCTs, or share exchanges, can be complex and should be reviewed in advance.
Capital gains tax planning should always be done before an asset is sold. Early advice can significantly reduce tax exposure and avoid unexpected liabilities.
Applegrow can help you:
Identify available CGT reliefs
Plan business or investment disposals
Structure transactions tax-efficiently
Ensure compliance with current legislation
Reliable systems to manage records, meet obligations, and support growth.
