How long should small businesses keep tax records for?

In this concise guide, we explain which tax records small businesses (including the self employed and limited companies) should keep, and for how long – according to the prevailing HMRC rules.

In a perfect world, we would all keep tax records for the same period of time, irrespective of the business structure we’re working under. Of course, this isn’t the case and the duration varies fairly significantly.

For individuals, the rules are universal; you need to keep all your tax records for 22 months from the end of the tax period to which they relate.

But, what about business-related tax records?

Sole Traders & Partnerships

If you are self-employed and do not operate via a limited company, you must maintain the following records:

  1. A record of all sales and takings, including cash receipts.
  2. A record of all purchases and expenses, including cash purchases.
  3. VAT records – including VAT sales and purchase invoices, import and export documentation, and any other details relating to your VAT account.
  4. PAYE records, if you employ anyone.
  5. Details of any grants you received as part of the COVID-19 Self-Employment Income Support Scheme (SEISS).

You must keep these records for at least 5 years after the 31st January submission deadline of the relevant tax year.

Limited Companies

If you operate via a limited company, you must keep the following records:

  1. Accounting records – including details of all assets, liabilities, income and expenditure.
  2. Business records – including bank statements, paying-in books, purchases, expenses and sales details.
  3. VAT records – including VAT sales and purchase invoices, import and export documentation, and any other details relating to your VAT account.
  4. Your company records, relating to company officials, any company resolutions and meeting notes, and entries on the PSC register (People of significant control).
  5. Any debentures, indemnities, loans secured against the company’s assets, details of any share transactions.
  6. Any records related to employees you have furloughed under the CJRS.

You must keep these records safe for at least 6 years following the end of your company’s last financial year.

Construction Industry Scheme (CIS)

The following details must be maintained by law:

  • Contractors – Details of all payments made to all subcontractors for work done and materials subcontractors have purchased. For example, subcontractor invoices.
  • Sub-Contractors – Details of all payment and deduction statements. For example, copies of invoices issued and payment statements received.

You must keep all of these records for at least 3 years following the tax year they relate to.

Employers

Employers must keep all PAYE records for 3 years (in addition to the current year).

Records you should keep safe include:

  • Payments made to employees.
  • Any deductions from your employee wages of Income Tax, National Insurance contributions (NICs) and Student Loan payments.
  • All details of employee benefits and expenses.
  • Tax code notices.
  • All records of statutory payments (including sick pay and maternity pay).

Final thoughts from the Bytestart team

In summary, unless you have a burning desire to destroy your tax records as soon as you are legally allowed to do so, our advice would be to keep your records – online or otherwise – safe, for at least 6+ years, just for your peace of mind.

Most small business people use cloud-based accounting systems these days, so much of this information will be secure anyway – particularly accounting and tax data.

Make sure you keep any off-line paperwork safe – such as your statutory records if you’re a limited company.

Last updated: 19th April, 2021

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