Managing business finances

Organising your business finances

Essential financial management practices - bank accounts, bookkeeping, and record keeping.

UK-wide
Guide summary

Keep your business finances organised. Open a business bank account, track income and expenses, and keep records for at least 6 years. Use accounting software if you are VAT registered or earn over £50,000.

  • Open a business bank account - required for limited companies
  • Keep records for 6 years (5 years for sole traders)
  • Use accounting software if VAT registered or earning £50,000+
  • Track income and expenses weekly or monthly
  • Keep personal and business money separate
  • Digital records required for VAT from April 2026
  • Claim all allowable expenses to reduce tax
  • Reconcile bank accounts monthly
  • Pay VAT and taxes on time to avoid penalties
  • Get an accountant if you are a limited company
On this page
UK-wide

Related guides in Tax & Finance

Good financial organisation is fundamental to business success. It keeps you compliant with tax obligations, supports better decision-making, and makes life easier when you need to provide financial information to banks, investors, or HMRC.

Why financial organisation matters

  • Legal compliance: You must keep records for tax purposes (minimum 6 years)
  • Tax efficiency: Claim all allowable expenses by tracking them properly
  • Better decisions: Understand profitability, cash flow, and where money goes
  • Easier funding: Banks and investors need organised financial data
  • Reduced stress: Tax returns and accounts are simpler with good records

Business bank accounts

Do you need a separate account?

Limited companies: Yes - legally required. Company money must be kept separate from personal funds.

Sole traders/partnerships: Not legally required but strongly recommended. Most personal account terms prohibit business use. Mixing funds complicates tax filing.

Choosing an account

Consider:

  • Monthly fees: Some accounts are free, others charge £5-30/month
  • Transaction limits: Free accounts may limit transactions
  • Integration: Does it connect with accounting software?
  • Card payments: If you need to accept cards, check merchant services
  • Overdraft facilities: Useful for managing cash flow gaps

Record-keeping requirements

What records to keep

  • Sales and income: Invoices, till records, bank statements showing deposits
  • Purchases and expenses: Receipts, supplier invoices, contracts
  • Bank and credit card statements: All accounts used for business
  • Payroll records: If you have employees
  • VAT records: If VAT registered
  • Asset records: Equipment, vehicles, property purchases

How long to keep records

Sole trader/partnership
5 years from 31 January following the tax year
Limited company
6 years from end of accounting period (some records may need longer)
VAT records
6 years
Payroll records
3 years after end of tax year they relate to (6 years recommended)

Bookkeeping basics

Methods

Cash basis: Record income when received, expenses when paid. Simpler but less accurate picture of profitability. Available to most sole traders/small partnerships.

Accrual basis: Record income when earned, expenses when incurred (regardless of payment). Required for companies, gives more accurate profitability view.

Accounting software options

For most small businesses, accounting software beats spreadsheets:

  • Automatic bank feed imports
  • Invoice generation and tracking
  • VAT calculation and MTD compliance
  • Financial reports at a click

Popular options: Xero, QuickBooks, FreeAgent, Sage, Wave (free)

Making Tax Digital (MTD)

Already applies to VAT-registered businesses. Extending to income tax:

  • April 2026: Sole traders/landlords earning £50,000+
  • April 2027: Those earning £30,000+
  • April 2028: Those earning £20,000+

MTD requires digital record-keeping and quarterly reporting via compatible software.

  1. 1

    Open a business bank account

    Required for companies, recommended for all. Compare options - some free accounts available for new businesses.

  2. 2

    Choose an accounting system

    Accounting software, spreadsheet, or paper records. Software saves time and supports MTD compliance.

  3. 3

    Set up a filing system for receipts

    Digital storage is fine - take photos of receipts. Many apps integrate with accounting software.

  4. 4

    Reconcile bank accounts regularly

    Monthly at minimum. Match bank statements to your records to catch errors and maintain accuracy.

  5. 5

    Understand your tax deadlines

    Calendar key dates - VAT returns, Self Assessment, Corporation Tax, annual accounts. Set reminders.

  6. 6

    Consider professional help

    Accountants can save more than they cost through tax efficiency and time savings. Essential for limited companies.

Financial management guidance

Resources for managing business finances and meeting record-keeping requirements.