If you’re self-employed, then keeping accounting records is part of your bookkeeping. But how long should you keep accounting records? What should you keep as part of your tax records? And how?!?
In this guide, I’ll answer all these questions and explain HMRCs legal requirements when it comes to your business records.
Don’t forget if you have a question on this guide or any of my others, you’ll find me inside my Facebook group – The Self-Employed Club.
Friendly Disclaimer: Whilst I am an accountant, I’m not your accountant. The information in this article is legally correct but it is for guidance and information purposes only. Everyone’s situation is different and unique so you’ll need to use your own best judgement when applying the advice that I give to your situation. If you are unsure or have a question be sure to contact a qualified professional because mistakes can result in penalties.
What Accounting Records Should You Keep When You’re Self-Employed?
The term ‘accounting records’ means all the different pieces of documentation that you use to do your accounts and prepare your tax return.
Here are some common business records that self-employed business owners need to keep:
- Bank statements
- Sales invoices
- Till rolls
- Marketplace statements and invoices like eBay, Etsy and Amazon
- VAT records (if you’re VAT registered)
- P60s or P45s if you are employed and self-employed
- Business mileage claim forms
- Records about any other taxable income you’ve received such as dividends or capital gains
- Copies of previous tax returns and tax calculations you have submitted
- Payslips with your tax code
Why Keep Business Records?
You need to keep hold of your business records as evidence of the numbers you’ve entered on your tax return. So say for example you claim for the cost of a new laptop the receipt when you purchased it will be proof of the date of purchase and that you are entitled to put in on your tax return in the event of a tax inspection.
How Long Should You Keep Your Accounting Records?
You must keep your accounting records, including copies of tax returns, for HMRC for at least 5 years after the 31 January you submit your tax return.
For example, you must keep all your tax records for your 2022/2023 tax return, which is due by 31 January 2024 until 31 January 2029.
How to Store Your Accounting Records
HMRC no longer needs you to keep paper copies of your tax records, which makes storage easier.
If you are doing your accounts on an accounting software like Xero, then you can upload your business records onto the platform as you enter your financial transactions.
If you are doing your accounts using a bookkeeping spreadsheet then you can store your business records in the cloud, using a platform like Dropbox or Google Drive.
Remember, however you do your accounting, it’s important all your business records are backed up safely. There are penalties for losing paperwork, even if it isn’t your fault.
What Happens if You Lose Your Tax Records
If you have misplaced tax and accounting records then try to get copies. For example, by calling your supplier or banks and checking through old emails. It is a legal requirement to have your tax records so it’s really important and you may have to pay penalties or interest if you cannot support figures on your tax return and it turns out you have not paid enough tax.
If you are filling your tax return and are missing information you can still submit it but you must let HMRC know if you are using provisional or estimated numbers.
Provisional means you’ll be getting the lost records replaced and will confirm the correct figures later. Estimated means you have lost the relevant tax records, are making a best guess and will not be changing the figures.
How Many Years Tax Returns Should You Keep
You must keep your self-assessment tax returns for at least 5 years after the 31 January you submit your tax return, just like the rest of your accounting records. Even though you’ll find them in your online tax account it’s recommended to download a copy when you submit your return in the event that you make changes to your returns.
How Long Should You Keep Bank Statements
You must keep your bank statements for at least 5 years after the 31 January you submit your tax return, just like the rest of your accounting records.
Can I Use Bank Statements as Receipts for Taxes in the UK?
You are able to use your bank statements as proof of a business receipt on your taxes as long as it’s made through a business bank account. You should make a note of the reasons for the transaction and why the receipt was missing as part of your accounting records so it’s clear what has happened and why.