Do you also wonder about how long you should keep the tax records in the UK? Why is it important to keep the old record intact for a long time? It may seem to be less important to you especially when you are done with using these old details. If you are an individual who is running a business as self-employed, you are in need to know everything about keeping the records intact for the required period for the sake of your business benefit.
It is vital to understand that accurately keeping the records is equally important to self-employed business owners. By accurate tax, we don’t mean to pay the right amount of tax only. You need to keep the record so that they can keep you protected at the time of business investigation by HMRC. There is a certain number of years suggested to maintain old records as well.
In this guide, you will get all your related queries answered as we have covered the required period to keep your tax records intact whether you are running your business as a sole trader or as a limited company.
We recommend finding professional help to further learn about How Long Do Businesses Need To Keep The Tax Records. Talk to our guys and get your queries answered quickly.
Tax Records – For How Long Do I Need to Keep Them?
It is suggested to keep the records intact and save the five-year period if you are a self-employed self-assessment taxpayer. The relevant tax year will be considered after the 31st of January as the deadline. In the case you aim to file your tax returns for the years 2018 and 2019, your relevant tax deadline will be 31st January of 2020. With these dates, you will be required to keep your record until the 31st of January in 2025.
If we take the example where an individual is running the business as a limited company, the rule of filing tax returns will vary from the details that are mentioned above. This case requires keeping the details of the tax for a longer period. The year of records is considered and accounting records will be kept for six years. There are a few exceptions where the limited companies are asked to keep the records for even a longer period. The details of these exceptions involve the following:
- In case you are experiencing an investigation by HMRC.
- The company tax returns were submitted late.
- Some equipment is purchased by the company and they should last for six years or more.
- A transaction covering more than one company is found out.
It depends on the type of business structure you have chosen to carry out your business activities that will decide your set of rules. Either way, you have to follow the instructions for maintaining the records of your business expenses and income. In the details below, we have discussed how this practise of record keeping might vary according to different business structures.
Sole Traders and Partnerships
How to Keep Records Intact?
There is a lot of information that is required to be saved. Along with the records, there should be proof too as per the instructions of HMRC. This includes the receipts of expenses, stocks and other goods. There must be an efficient filing system to keep the records. This will ease your trouble times like end-year tax. It is recommended to use accounting software that will help you to maintain the records in an error-free manner. This will also save the time and energy that you waste on doing the records manually.
What to Keep in the Records?
According to HMRC, the following details are required to save for a long period.
- Personal income. Rental incomes, savings, and investments are a few such examples.
- In case you have hired employees, the PAYE will also be a part of the records.
- If your company is VAT registered, VAT records are also required to be saved.
- Income and sale details.
Choose the Accounting method:
There are two main examples of accounting methods. The first is traditional accounting and the second is cash basis accounting. When you are self-employed, you can use any one of them.
In the case of traditional accounting, you need to keep the business expenses and income with the relevant dates. And in the case of cash basis accounting, your business income and expenses are saved but with the date of payment or when you pay the bill.
Limited Companies and Their Tax Records
When you adhere to the business structure that is known as a limited company, you need to consider the following:
You know that you will have to pay fines and penalties if you do not keep your accounting records. It is very important to keep these records otherwise you will be disqualified as a company director. The accounting and financial details you need to consider for records include the following:
- Profit and losses
- Details of assets
- Tax returns
The directors of companies are more liable to keep the records in comparison to the sole traders. This makes the limited company structure a little more complex than others. Other than the financial records, you are liable to keep the company records. Shareholders, transactions, and loans are a few such examples.
How to Maintain the Records?
It is beneficial to hire the professionals like bookkeepers and accountants to maintain these records promptly.
The Bottom Line
To sum up the discussion of keeping the tax records, we can say that the process of maintaining the records for a long period is not an easy task but it will keep you and the business protected when HMRC requires the details at the time of business investigations. We hope you have developed a better understanding of maintaining your company’s tax records.
Disclaimer: The general information provided in this blog about how long to keep Tax Records uk includes its text and graphics. It does not intend to disregard any of the professional advice.