Bookkeeping: what it covers, how long to keep records and who to hire

Bookkeeping is the routine part of accounting: logging each sale, bill and payment, matching them to the bank, and keeping the paperwork that proves them. An accountant takes that record and turns it into a tax return or statutory accounts. If the record is wrong or missing, everything built on it is wrong too, which is why most accountants will ask what state your books are in before they quote.

What does a bookkeeper actually do?

The core job is keeping a complete, accurate ledger. In practice that is a short list of recurring tasks, and the useful question is which of them you want to hand over.

• Recording sales invoices and the money that comes in against them.
• Entering supplier bills and expense receipts, and coding each to the right category.
• Reconciling the books to bank and card statements so that every difference is explained.
• Chasing unpaid customer invoices and tracking what you owe suppliers.
• Preparing VAT figures, payroll inputs or management summaries where the engagement includes them.
• Handing a clean set of records to your accountant at year end.

Software has taken over much of the typing. Bank feeds import transactions and receipt apps read amounts from photographs. The human work that remains is judgement: deciding whether a payment is a business cost, a director's loan or a personal withdrawal, and spotting the entry that does not look right.

What is the difference between a bookkeeper and an accountant?

A bookkeeper records past transactions. An accountant interprets them: preparing accounts and tax returns, advising on tax and structure, and often signing off the numbers for Companies House or HMRC. Plenty of small businesses use one firm for both, and some accountancy practices run a bookkeeping service inside the same engagement.

If you are unsure which you need, the dividing line is usually this: can you already produce complete, reconciled records each month? If so, go straight to an accountant. If not, fix the records first, because paying an accountant's hourly rate to sort out a shoebox of receipts is usually the slower route.

How long do you have to keep business records?

It depends on whether the business is a company or a sole trader. The periods below come from GOV.UK. Both are minimums, and HMRC can ask for longer if it opens a compliance check.

GOV.UK gives an example of how the sole trader rule works: records for 2022 to 2023, filed online by 31 January 2024, need to be kept until at least the end of January 2029. In practice many bookkeepers keep digital copies longer than the minimum, because storage is cheap and a missing invoice is expensive.

Cash basis or traditional accounting: which should you use?

Under cash basis you record income when money arrives and an expense when you pay it. GOV.UK says it has been the default for sole traders since the 2024 to 2025 tax year, and that you can switch to traditional accounting if you prefer. The attraction is that you are never taxed on an invoice you have not yet been paid for.

Traditional accounting records income when you invoice and costs when you are billed, whether or not cash has moved. It gives a truer picture of profit if you extend credit to customers or hold stock, and it is what a limited company's statutory accounts are based on. Pick the method deliberately, and ask your accountant whether a switch part-way through a business's life creates adjustments.

What does Making Tax Digital mean for your records?

Making Tax Digital for Income Tax applies to sole traders and landlords whose qualifying income is above a threshold. GOV.UK sets the start dates by tax year of qualifying income: over £50,000 in 2024 to 2025 meant starting from 6 April 2026, over £30,000 in 2025 to 2026 means starting from 6 April 2027, and over £20,000 in 2026 to 2027 means starting from 6 April 2028.

The records requirement is specific. GOV.UK says you only need digital records for your self-employment and property income and expenses, kept in compatible software, and that you send a summary update every 3 months. It also says HMRC does not provide software, so you will need to buy or choose a product. A spreadsheet on its own may not be enough, so check that whatever you use is on HMRC's list of compatible software.

This is where a bookkeeper pays for themselves. Someone who already categorises your transactions weekly can send the quarterly figures with little extra work, whereas a year-end scramble becomes four smaller scrambles. Read more about the reporting side in our Self Assessment guide.

Does a bookkeeper need anti-money laundering supervision?

Usually yes. GOV.UK lists professional bookkeeping among the accountancy services covered, described as recording, reviewing, analysing, calculating and reporting on financial information for other people. A bookkeeper does not have to register with HMRC if a listed professional body already supervises them, such as AAT or the Institute of Accountants and Bookkeepers, or if all their customers are themselves supervised.

Otherwise they must register with HMRC, and GOV.UK states that trading while not registered is a criminal offence. For you as a client, the practical point is simple: ask which body supervises them for money laundering purposes, and expect to be asked for identification yourself. A bookkeeper who will not explain their supervision is a risk to your reputation, not just theirs.

How do you check and choose a bookkeeper?

1. Ask which professional body they belong to, then look the person up on that body's own public register rather than relying on a logo on their website.
2. Ask who supervises them for anti-money laundering, and what their registration is.
3. Ask what software they work in and whether you will own the file if you leave.
4. Ask for a written scope: which tasks, how often, and which are charged separately, such as VAT returns or payroll.
5. Ask for a fixed fee in writing, and what happens to the price if your transaction volume grows.
6. Ask how they handle missing receipts, and who deals with HMRC if a query arrives.

To check that an accountant or accountancy firm is registered, search the register of the relevant body (ICAEW, ACCA, CIMA, AAT, ATT or CIOT). The firms in this directory are matched to those registers, and you can compare them by town through our city pages. If your records also feed a VAT return or payroll, see how those services work in the VAT returns guide and the payroll guide.

Prices vary with how many transactions you have, how tidy the backlog is and which software is involved, so ignore any quote that does not say what it includes. If you are still choosing a business structure, our comparison of sole trader or limited company sets out what each means for your record-keeping duties, and our guides cover the other services.