What Records Do I Have To Keep?
You must keep accurate records for your business. For example, your accounts, records of tax you have paid and all other records of your income and outgoings. You’ll need these to help you fill in your Self Assessment tax return or to answer any questions from HM Revenue & Customs (HMRC) about a tax return that you’ve filled in.
You’ll need to keep your business records separate from your personal records and for longer. Most businesses find that it helps to have a separate business bank account.
Business records you may need
Keeping up-to-date and accurate records from the start is important for your business. It makes it easier to fill in your tax return. A good record system helps you keep track of your expenses. You may have to pay a penalty if you don’t keep records or if you don’t keep your records for long enough.
Records you must keep
Your business records must include:
a record of all your sales and takings
a record of all your purchases and expenses
Records you may need
All businesses are different and there are many types of detailed records that you may need to keep. Here are some examples:
invoices and receipts
electronic sales records or till rolls
P60s (if you are also employed)
payroll records (if you have employees)
hire purchase records
an inventory of stock on hand
a record of money taken out of the business for personal use
All this information will be useful for filling in your tax return and answering any questions that HMRC may have.
How to keep your records
Keep your records either on paper or on computer. For electronic records you must:
capture all the information (front and back)
save information in a readable format
keep a back-up
If you’ve got more than one business you’ll need to keep separate records for each business.
Keep detailed records. It will make it easier to answer any questions that HMRC has about your tax return.
Working in the construction industry
You’ll need to keep records of all your income and outgoings – whether you’re paid ‘gross’ or with some tax taken off. If some tax has been taken off you’ll need to keep your payment statements and – if higher rate tax is taken, keep the verification number. You’ll need these for your tax return to reclaim any overpayment of tax.
It will help if you keep separate records of:
purchases and sales of assets, such as tools and computers
day to day running costs and sales
This is because you may be able to claim capital allowances for certain assets. Rather than claiming the whole cost at the time you buy, you reclaim the cost over time. You’ll need to keep detailed records to support your claim.
Records related to both business and personal use
It’s important that you keep your business and personal records separate, so that you can work out exactly what relates to your business.
Sales or income
It’s easy to make mistakes when you are recording sales if:
you take stock for you or your family to use
you supply goods or services to someone else in return for goods or services
Even if you don’t record these transactions through a till you still need to keep a record of them. You should note down the goods or services taken or supplied and their normal retail price. Your business profits must be worked out using this value.
Expenditure or outgoings
You may have assets you use for both business and private use. For example, you may live in a flat above your shop premises and receive one shared electricity bill. You must keep enough records so that you can work out which costs relate to business use and which relate to your own use.
If you use a vehicle for both business and private use, it’s usually enough to keep a record of business and private mileage. Split the vehicle running costs in the same proportions.
How long to keep your records
You must normally keep your business records for another five years after the online tax return deadline of 31 January, in case HMRC decides to check your return. The same date applies even if you’ve sent in a paper tax return.
The tax return deadline for an online 2011-12 return is 31 January 2013.
You send your tax return in before this deadline.
You need to keep your records until 31 January 2018, five years later.
But if HMRC send you, or you send back your tax return very late, you may need to keep your records for longer. You need to keep them until the later of:
five years after the 31 January tax return deadline
fifteen months after the date you sent your tax return
If HMRC has started a check
You may need to keep your records for longer if HMRC has started a check into your tax return. In this case you’ll need to keep your records until HMRC writes and tells you they’ve finished the check.
If your records are lost or destroyed
If your business records have been lost or destroyed and you can’t replace them you must let HMRC know what’s happened. You should try to get the missing information in other ways. For example, you can ask banks for interest figures or copies of bank statements. They may charge for this.
Don’t delay sending in the tax return while you wait for copies of records. Use the information you’ve managed to get together to fill in the tax return. If it turns out you can’t replace the information you’ll need to estimate the missing figures. You must tell HMRC whether any figures are:
estimated – you want HMRC to accept these as final
provisional – you are using these until you can confirm them (you must tell HMRC when you will give actual figures)
If you amend the tax return later and you’ve underpaid tax, you may have to pay interest and penalties.