Keeping on top of your self-employed business records can be both time consuming and overwhelming! However, if you are self-employed, you’ll need to keep your business records. This is in case HMRC ever ask you to back up the numbers you enter on your tax return. They will use this as evidence for expenses you’ve claimed and to demonstrate that you haven’t omitted any income. So you know what essential paperwork should be kept and how to store your business records, I’ve created this guide to help you.
What Business Records Must You Keep
The records you keep hold of will vary from business to business, but in general most will need to keep some or all of the following:
- Bank statements
- Sales Invoices
- Supplier invoices
- Cash expense forms & receipts
- VAT records if you are VAT registered
- PAYE records if you employ people
- Business credit card statements & receipts
- Mileage claims
- Statements detailing your online earnings like eBay Statements, Paypal account and Etsy income
- SEISS grant details
You’ll also need to keep additional evidence for any sections that you fill out as part of doing your tax return. For example, this might include payslips with your tax code, details of capital gains, rental income or dividends.
How to Store Your Business Records
The easiest way to store your business records is to keep them digitally using platforms such as Dropbox and Google Drive. It’s crucial to make sure that whatever system you choose to store them, they are safely backed up. HMRC won’t cut you much slack for failing to file a tax return because you lost your records!
I use Google Drive because it’s included as part of my G Suite subscription and has an option to take a photo within the app. This means your receipts are automatically snapped and saved in your drive. It’s beneficial when I am out and about because I don’t need to carry business receipts around until I get home. I can also save invoices that are emailed to me straight to my Google Drive on my laptop.
When it comes to setting up a file structure for saving your business records, there isn’t any right or wrong way to do it. However, you may need to do a little trial and error to find the right solution for you. As an example, here is how I save my records in Google Drive:
How Long Must You Keep Your Business Records
HMRC requires that you must keep your ALL your business records, including your business receipts, for at least 5 years after the 31 January submission deadline of the relevant tax year. That means you’ll need to keep your records to support your 2020/2021 tax return until 31 January 2026.