Keeping good records is important for many reasons. It will enable you to know your tax liabilities as soon as possible and to submit timely and accurate tax returns. You’ll also be able to respond quickly and confidently to any HMRC enquiry. And you’ll avoid the penalties that can be imposed if your records are incomplete or inaccurate.
If you’re in business, maintaining accurate books and supporting records allows you to keep track of trading performance – income, profits and cash. This means that you can take decisions based upon up to date, accurate information. Always worth bearing in mind:
Better data => Better analysis => Better decisions => Better business => Better life
What records do I need to keep?
In general, you should keep sufficient records to support any income or expenses included in a tax return.
The specific records you’ll need to keep will vary depending on whether you’re running a business or not, whether you’re an individual taxpayer or operating a limited company, and on what taxes you’re dealing with (corporation tax, VAT, PAYE, income tax and capital gains tax).
Do I need to keep paper records?
No, you can store your records electronically. However, HMRC can charge a penalty if records are not accurate, complete and readable, so take care if scanning.
How long do I need to keep my records?
That depends on the tax and taxpayer, as follows:
- Companies – corporation tax: 6 years from the end of the company’s accounting period. For instance, if a company has a year-end of 31 December 2019, records should be kept until 31 December 2025.
- Individuals (not running a business) – self assessment income tax and capital gains tax: 1 year from the 31 January following the end of the tax year. For tax year 2019/20, until 31 January 2022.
- Individuals (running a business as a sole trader or partner) – self assessment income tax and capital gains tax: 5 years from the 31 January following the end of the tax year. For tax year 2019/20, until 31 January 2026.
- Businesses – VAT: 6 years from the end of the business’ accounting period. For instance, if a business has a year-end of 31 December 2019, records should be kept until 31 December 2025.
- Employers – PAYE: 3 years from the end of the tax year. For 2019/20, until 5 April 2023.
Note the above deadlines are the minimum, normal time periods. The deadlines can be extended by HMRC in certain circumstances. So, if you’re planning to destroy any important records, contact your accountant beforehand to check you are safe to do so.
What happens if I lose my records or they are destroyed?
You must inform HMRC and do your best to recreate the records. If you use any provisional or estimated figures when completing a return, you must disclose this to HMRC.
Data protection
You should also comply with the Data Protection Act, if you store or use personal data.
Keeping you compliant | Saving you tax | Helping you grow
Information in this publication is intended to provide only a general outline of the subjects covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. Whyatt Accountancy and the writer accept no responsibility for any loss arising from any action taken or not taken by anyone using this material.