What Records Do I Need To Keep For Tax Purposes?
July 22nd, 2009. Published under Accounting. No Comments.
If you are self-employed and running your own business, it is imperative that you keep a number of records back, just in case you may need to rely upon them when liaising with Her Majestys Revenue and Customs (HMRC). Not only will this ensure that you are more organised, within your own everyday business practices, but it will also help to ensure that you do not incur any hefty fines for failing to do so.
To be honest, it is probably just a matter of common sense. If you have only just become self-employed, it is essential for you to quickly adopt the mentality of keeping every document that has any form of financial relevance to your business. So, for example, this will be documents such as invoices to customers and receipts for items that you have bought for the business. Furthermore, you are required to keep all of these records back for at least 5 years and 10 months after the applicable tax year. The HMRC may request this documentation and if you are not able to supply full and accurate records of your business accounts, you could be liable for a penalty of anything up to 3,000. With this in mind, take this matter very seriously, as the HMRC always will.
You will need to keep back any records which relate to capital gains or losses and for the same length of time as stared above.
A lot of people slip up with the HMRC because they fail to disclose and keep records for other sources of income that they may have. For example, if you are paying into a private pension, or if you have any savings accounts, you will need to keep back the statements for these and submit them to the HMRC if they request them. Also, it is absolutely imperative for you to keep all of the records that pertain to any state benefits that you may be in receipt of.
It is usually best practice to keep a separate business account for all such dealings. This eliminates any possibility for future confusion. Although you can have a personal and business account combined if you wish.
At the end of each tax year, you will be required to utilise the records you have kept back in order to complete your tax self-assessment. Having all of the documentation organised into an easy and workable system will make this process so much less stressful and your dealings with the HMRC will be less complicated. Get into the habit of making sure you are very organised on this score and dont forget that you will have to keep all of the files back for nearly six years after.
Record keeping really neednt be the nightmare so many people think at first. Your attitude towards such a necessity is likely to be a reflection on how well organised you are as a business person. If you are struggling with record keeping, or you feel that you simply do not have the time to comply with such administrative tasks, instruct an accountant to lighten this load for you. This could transpire to be the best thing you have ever done for your business.
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