The Foundation of Your Coaching Business
As a life coach in the UK, your primary focus is empowering clients, but your business's financial health depends on robust record-keeping. Understanding precisely what records must life coaches keep for HMRC compliance is not just a legal obligation—it's the bedrock of your practice's sustainability. HMRC requires you to keep records of all your business transactions for at least 5 years after the 31 January submission deadline of the relevant tax year. For the 2024/25 tax year, this means records must be retained until at least 31 January 2031. Failure to do so can result in penalties ranging from £100 to £3,000, depending on the severity and whether HMRC deems it a deliberate failure.
The core principle behind HMRC's requirement is simple: they need to verify the income and expenses you declare on your Self Assessment tax return. For life coaches, this involves tracking a unique blend of client-facing activities and business operations. Getting this right from the start prevents stress, saves money, and allows you to focus on your coaching. Using a dedicated tax planning platform can transform this administrative burden from a chore into a seamless part of your workflow.
Income Records: Tracking Every Pound Earned
The first pillar of knowing what records must life coaches keep for HMRC compliance is comprehensive income tracking. You must record every single payment you receive from your coaching activities. This includes:
- Client session fees (one-off and package payments)
- Income from online courses or webinars
- Revenue from eBooks, workbooks, or other digital products
- Speaking engagement fees
- Any deposits or retainers
For each payment, your records should include the date, the client's name, a description of the service, the amount, and the payment method. If you invoice clients, keep a copy of every invoice issued, even if it remains unpaid. For coaches operating under the VAT threshold (currently £90,000 for 2024/25), you don't need to register for VAT, but you must still track your total taxable turnover to ensure you don't exceed it. A real-time tax calculations feature can help you monitor this threshold effortlessly.
Business Expense Records: Legitimate Costs You Can Claim
The second critical element is meticulously recording business expenses. These are the costs you incur "wholly and exclusively" for your coaching business, and they directly reduce your taxable profit. Knowing which expenses are allowable is key to optimizing your tax position. Common claimable expenses for life coaches include:
- Coaching-Specific Training: Costs for courses, certifications, and CPD that maintain or improve your coaching skills.
- Home Office Costs: If you work from home, you can claim a proportion of your utility bills, council tax, and mortgage interest/rent. The simplified method allows a flat rate of £6 per week without detailed calculations.
- Professional Indemnity Insurance: A crucial cost for any coach.
- Marketing and Website Costs: Fees for website hosting, domain names, online advertising, and professional photography.
- Travel Expenses: Mileage for client meetings (45p per mile for the first 10,000 miles, 25p thereafter), train fares, and parking. Keep a detailed mileage log.
- Equipment: Laptops, software subscriptions (like Zoom), and office furniture. Note that for equipment over £200, you may need to claim capital allowances instead.
- Professional Subscriptions: Membership fees to bodies like the International Coach Federation (ICF).
For every expense, you must keep the original receipt or invoice. A digital photo or scan is acceptable to HMRC. Organising these records is where many coaches struggle, but it's a core part of understanding what records must life coaches keep for HMRC compliance.
Bank Records and Digital Transactions
Your business bank account (which should be separate from your personal account) is the central ledger of your practice. You must keep all bank statements, whether paper or digital. This also extends to digital payment platforms like PayPal, Stripe, or Wise. Reconcile these statements regularly with your income and expense records to ensure nothing is missed. Any transfers between personal and business accounts should be clearly documented, explaining the purpose (e.g., "Director's Draw" or "Capital Introduction"). This level of detail is non-negotiable when establishing what records must life coaches keep for HMRC compliance and is vital for accurate tax scenario planning.
Making Tax Digital and the Role of Software
The landscape of what records must life coaches keep for HMRC compliance is evolving with Making Tax Digital (MTD). While MTD for Income Tax Self Assessment (ITSA) is now mandated for sole traders and landlords with gross income over £50,000 from April 2026 (and over £30,000 from April 2027), it signals a clear shift towards digital record-keeping. This means maintaining digital records and submitting quarterly updates to HMRC using compatible software.
Adopting a tax planning software solution like TaxPlan now future-proofs your practice. It automates the tracking of income and expenses, links directly to your bank feeds for easy reconciliation, stores digital copies of receipts, and generates the reports needed for your Self Assessment. This not only ensures HMRC compliance but also gives you a real-time view of your profitability and tax liability, helping you make better business decisions. It turns the question of what records must life coaches keep for HMRC compliance from a source of anxiety into a managed, automated process.
Practical Steps for Getting Started Today
If you're feeling overwhelmed, start with these simple steps to master what records must life coaches keep for HMRC compliance:
- Open a Dedicated Business Bank Account: This is the single most important step to separate your finances.
- Implement a "Capture Everything" System: Use a simple app on your phone to photograph receipts the moment you get them.
- Schedule Weekly Admin Time: Block out 30 minutes each week to update your records, file digital receipts, and reconcile your accounts.
- Explore a Tax Planning Platform: Investigate how modern software can automate these tasks. Many offer free trials, allowing you to experience the time savings firsthand.
- Know Your Deadlines: The Self Assessment tax return for the 2024/25 tax year must be filed online by 31 January 2026. Payments are due on the same date.
By systematising your approach to what records must life coaches keep for HMRC compliance, you reclaim time and mental energy to invest in your clients and your own growth.
Ultimately, the question of what records must life coaches keep for HMRC compliance is about building a professional, resilient business. Accurate records are your first line of defence in a tax enquiry and your most powerful tool for understanding your financial performance. Embracing technology to handle this complexity is not just smart; it's essential for the modern coach who wants to thrive, not just survive.
