Luke spent a decade at two of the UK’s largest accounting firms delivering tax advice to household names. Frustrated by the lack of tax advice offered to small businesses, and the 'once a year' compliance led approach from most traditional accountants Luke set up Raw. Using his experience, Luke now helps owner managed and entrepreneurial businesses take back control of their finances through simple, jargon-free advice. As an ICAEW Chartered Accountant and tax advisor, Luke loves nothing more than helping his clients pay less tax and maximise their earnings. Commercially minded and pragmatic, Luke prides himself on building long lasting, trusted client relationships.
Keeping accurate records is crucial for self-employed business owners and small businesses.
Accurate business records not only ensure that you pay the correct amount of tax, but they can also help you avoid difficulties should HMRC launch a tax inquiry .
Additionally, business owners must keep records and retain tax documents for a specific period of time. But how long do you need to keep tax records for small businesses?
Businesses who neglect to provide HMRC with the necessary financial records and accounting records risk facing severe penalties. These penalties could cost several thousand pounds or perhaps more.
Some organisations may struggle with a lack of storage space for bank statements and company records, but you can maintain them online rather than on paper if you want. Just keep in mind that they must be easily readable.
Depending on your business structure—basically, whether you’re self-employed or manage a limited company—you must keep your records for a specific period of time. Regardless of your business’s form, if you’re an employer, you also have obligations regarding the preservation of records.
Taxpayers who are self-employed and pay self-assessment must preserve their business records for at least five years following the relevant tax year 31st January deadline.
There are additional guidelines and standards if you operate a limited company and must file a corporate tax return .
Your accounting records must be kept for a longer period of time, six years, after the conclusion of the last fiscal year to which they are related.
Depending on your business structure—basically, whether you’re self-employed or manage a limited company—you must keep your records for a specific period of time. Regardless of your business’s form, if you’re an employer, you also have obligations regarding record keeping.
Limited firms may need to preserve records for longer in the following circumstances:
If you operate as a sole proprietor or as a member of an unincorporated business partnership, you must keep your company records for at least five years from the end of the applicable tax year on January 31. All sales paperwork, business expenses, personal income, business income, sums received into and taken out of the firm, and, if relevant, VAT and PAYE information are all included in these documents.
You must keep these records on hand until HMRC notifies you otherwise because you are the subject of an HMRC inquiry. Bank statements, sales receipts, purchase invoices, cheque book stubs, and VAT documentation are often among the records that must be kept in every situation.
Accounting and invoice software is available, and it can automate some of these processes while centralising your records. Some apps, for instance, allow you to scan and submit receipts.
If you do lose your records, you must inform HMRC when filing your tax return whether you’re using provisional or estimated data. In the interim, provisional data are the most accurate approximations.
If you’ve received a government grant, you should typically keep the supporting documentation for four years after the grant was awarded.
There is more documentation to take into account, and the laws for limited organisations are slightly different. Limited company directors must keep additional records in addition to the ones stated above, such as information on the firm’s assets, liabilities, loans backed by those assets, and shareholder activities.
Company records must typically be kept for six years following the conclusion of the accounting period. However, certain records must be retained for a minimum of ten years, such as:
At Raw Accounting, we are more than happy to advise you on any queries you may have about small business accounting and tax record keeping.
Our services can be tailored to support your small business:
For a free, no-obligation chat about how we can help with your tax records and accounting, get in touch today.
Records must be kept for six years following the end of the most recent firm fiscal year to which they pertain, or longer if: they reveal a transaction that spans multiple business accounting periods. The company has invested in gear or equipment that it anticipates will endure longer than six years.
Sales slips, paid bills, invoices, receipts, deposit slips, and cancelled cheques are examples of supporting documentation. You can find the data you need to record in your books in these documents. These records should be preserved because they provide evidence for the entries made in your books and on your tax return.
An HMRC audit will also be conducted for the reasons listed below:
