Running a business in the UK involves many duties, including staying prepared for a possible HMRC audit. An audit can happen for several reasons, including routine checks and targeted inquiries. Preparation reduces stress and helps keep your operations compliant in the 2025/26 tax year. Over the past 60 years at Thomas Barrie & Co., we have worked with many businesses, so we have seen how thorough record-keeping and timely responses can make a big difference.
Below, we share practical steps on how to prepare for an HMRC audit, from keeping detailed records to conducting regular checks. This approach reduces your chance of penalties and supports a healthy cash flow.
Understand what triggers an HMRC audit
HMRC often checks returns when it spots irregularities, such as large swings in turnover or a mismatch between your tax returns and other data. They also run random audits to ensure a fair system. For the 2025/26 tax year, be aware of common triggers, which include:
- Large or sudden changes in your reported income or expenses
- Consistent filing of late or inaccurate returns
- VAT discrepancies (especially if your turnover is above the £90,000 registration threshold)
- Claims for unusual or very high expenses
Staying aware of these triggers means you can take action before issues arise.
Keep records in order
Good record-keeping lies at the heart of audit readiness. HMRC may ask for documents that back up the figures in your returns. These include:
- Invoices (including those raised for sales and received for expenses)
- Bank statements and credit card statements
- Payroll records (including PAYE details and pension contributions)
- VAT returns, if applicable
- Receipts for business purchases, petty cash accounts, and mileage logs
Move towards digital record-keeping to make it simpler to store and retrieve data. Many small businesses find that accounting software helps keep records consistent. Under the Making Tax Digital initiative, HMRC has encouraged more businesses to use compatible software for VAT returns, and you may benefit from adopting a similar approach for other parts of your business accounts.
Perform regular internal checks
Regular checks can highlight small errors before they turn into major problems. Set aside time each quarter to review financial statements, compare them against bank records, and confirm that all invoices and expenses align with your tax returns. This step helps you find and correct mistakes early before HMRC spots them.
It can also be helpful to ask a colleague to verify calculations. A second pair of eyes often spot discrepancies you might miss. This process might add extra time to your routine, but it can save you trouble in the long run.
Seek professional support when you need to know how to prepare for an HMRC audit
Many businesses feel uncertain about the best way to respond to HMRC. This is where professional support can be a major asset. We have seen how a proactive review by an accountant can reveal missed details and help present information clearly.
Working with an accounting practice like Thomas Barrie & Co. allows you to tap into expert insight on compliance and potential risks. Our team can assist with regular accounts reviews and advise on areas that might attract attention, such as expense claims or VAT submissions.
Respond to requests promptly
When HMRC first contacts you about a review, you will usually receive a letter or call requesting specific documents. The best approach is to reply quickly and politely. If you ignore the request, it can raise doubts and lead to further inspections.
Provide clear copies or scans of the requested records, and include any supporting evidence that may help explain unusual figures. For example, if you had a one-time jump in turnover because of a large contract, share the contract or related documentation to avoid confusion.
If you need more time to gather all the details, let HMRC know as soon as possible. They tend to be more accommodating if you keep them informed rather than wait until the last minute to file for an extension.
Know the documents HMRC might request
Although every audit is different, HMRC typically wants to see records that explain how you arrived at your declared profits, expenses, and VAT figures. You may be asked for:
- Sales ledgers and purchase ledgers
- Chequebook stubs and paying-in slips
- Annual accounts (which you should also file with Companies House if you run a limited company)
- PAYE records, especially if you have employees on your payroll
- Stock levels, if relevant to your type of business
It helps to keep these items well-organised throughout the year so you can respond to an audit request quickly and accurately.
Why compliance matters
When you comply with HMRC rules, you minimise risk and build a stable foundation for future growth. An audit that ends with no major findings boosts your credibility with banks and potential investors. According to HMRC’s annual report for 2022/23, most audits are closed without large penalties, but where businesses are found to have underpaid taxes, the average amount owed can be substantial.
Staying compliant also lets you focus on improving sales, controlling costs, and planning for next year’s opportunities rather than worrying about fines. If you use a professional accountant, you get peace of mind that your tax returns and submissions are accurate for the 2025/26 tax year and beyond.
Minimise risk with efficient processes
You can reduce your chance of an audit – or handle one smoothly if it happens – by:
- Maintaining consistent bookkeeping: Update your records daily or weekly rather than at the end of the month.
- Using reliable accounting tools: Cloud-based software can help you store data securely and save time when creating invoices and tracking expenses.
- Scheduling check-ups: Book a periodic review with an accountant. This ensures you follow the latest tax rules and highlights possible issues in your financial statements.
- Setting aside funds for taxes: Keep a separate account to ensure you do not run short when paying corporation tax or VAT is time. This approach protects your cashflow from surprise expenses.
- Training staff: If you have a team, give them basic guidance on handling invoices and receipts. Well-trained staff help reduce mistakes and keep records accurate.
Plan for changes in 2025/26
For the 2025/26 tax year, be aware of thresholds for personal allowances, corporation tax, and other taxes that may apply to your business. Keep track of any announcements from HMRC about changes in allowances or rates. Guidance is often available through official pages such as HMRC’s business tax pages to help you stay informed.
We recommend adding these figures to your yearly planning and ensuring your records reflect up-to-date rates. If you are unsure how changes apply to your business, our Thomas Barrie & Co. team can offer guidance based on your needs.
Be audit-ready
Preparing for an HMRC audit is not just about meeting your legal obligations. It also supports your long-term stability. Keep detailed records, respond to timely requests, and seek expert help when needed. These steps help you maintain compliance and reduce stress throughout 2025/26 and future tax years.
If you would like support or a review of your current approach, we are here to help. Get in touch to discuss how to prepare for an HMRC audit; we can support your business during an audit or at any stage of your tax journey.