16 Feb Record Keeping and Capital Allowances: What Self-Employed Businesses Should Know

If you are self-employed, keeping accurate records helps you understand how your business is performing and ensures you pay the correct amount of tax while claiming the expenses and allowances you are entitled to.

Why Record Keeping is Important

HMRC requires self-employed individuals to keep clear and accurate records of their business activity. In practice, this means tracking:

• income
• business expenses
• receipts and invoices
• bank transactions
• purchases of equipment or other assets

Without proper records, it is easy to make mistakes, miss expenses, or spend unnecessary time correcting errors later.

Understanding Business Expenses and Capital Allowances

Most regular business costs, such as office supplies or phone bills, are deducted in the year they are paid, depending on the rules that apply. These are known as day-to-day expenses.

Larger items used over a longer period — for example computers, tools, or equipment — are treated differently. These are known as capital items, and tax relief is usually claimed through capital allowances rather than as a normal expense. The most common types include:

• Annual Investment Allowance (AIA) – often allows the full cost of qualifying assets to be deducted in the year of purchase.
• First Year Allowances – available for specific assets, allowing full relief in the first year.
• Writing Down Allowances – allow you to claim a percentage of the asset’s value over time if full relief is not available immediately.

Choosing the correct allowance affects when and how much tax relief you receive.

Record Keeping: What You Should Be Tracking

Your taxable profit is calculated by taking your business income and deducting allowable expenses and capital allowances, while you need clear records of:

• all business income
• business expenses
• receipts and invoices
• bank statements
• asset purchases (such as equipment or vehicles)

Keeping digital records can make this much easier, but even paper records are also acceptable if they’re organized and complete.

We Can Help Getting the Right Support

At our accounting firm, we work with self-employed individuals and small businesses every day. Our role isn’t just to submit numbers — it’s to help you understand them.

We can help you:

• identify allowable expenses and capital allowances
• set up and maintain clear record-keeping systems
• ensure you claim the full tax relief you’re entitled to
• reduce errors, stress, and last-minute work at tax time

Contact us today to see how we can support your business!