For anyone doing business in the UK, whether as a self-employed individual or as a limited company, ensuring you have accurate and timely financial records is not only best practice but also a statutory requirement. HM Revenue and Customs (HMRC) requires these records to validate the correctness of your tax submissions. But how long should one keep these records? Let’s dive into the specifics.
How Long to Keep Your Records?
The duration for which you must retain your financial records hinges on your business structure and whether you've submitted your tax returns by the due date.
1. Self-Employed Individuals:
Tax Returns Sent On or Before the Deadline:
Duration: Keep your records for at least 22 months following the end of the tax year that the tax return corresponding to.
Example: If you submitted your tax return for the financial year 2022-2023 online by 31 January 2024, you should maintain your records until at least the end of January 2025.
Tax Returns Sent After the Deadline:
Duration: Retain your records for a minimum of 15 months after you've sent the tax return.
2. Limited Companies: - Companies must keep certain financial records for 6 years. This includes documents like invoices, receipts, payroll details, and so on. HMRC can initiate a check on your records anytime within this period to ensure tax compliance.
Why is Record Keeping Essential?
Having organised records facilitates smoother tax return processes, helps in tracking business growth, aids in obtaining financial support or loans, and ensures compliance with HMRC requirements. Most importantly, HMRC can inquire about your records to ensure that your tax submissions are accurate.
Being diligent about maintaining and storing your financial records is integral to the smooth operation of your business. It not only ensures that you remain compliant with HMRC's regulations but also gives you a clearer insight into your business’s financial health. If in doubt, always consult with a professional accountant or bookkeeping service like Hamollisons Bookkeeping Services to guide you.