When you run your own UK contractor company, it is important to know how to how to organise your small business records. As part of this, you need to know how to complete your business record keeping and how to maintain business records (UK). In the main, when keeping business records, this will include the basic bookkeeping via a business record keeping system as well as maintaining the financial records for the business. Notably, it is even more important to keep accurate records when you maintain VAT record keeping. A contractor bookkeeping spreadsheet was normal in years gone by, however nowadays many use a contractor bookkeeping software via a digital online system.
As mentioned, when you are a UK contractor, you may have used a simple bookkeeping for contractors’ solution previously such as an Excel spreadsheet. However, in most cases the simple bookkeeping spreadsheet is now a thing of the past and most now keep their records online, especially if they are VAT registered.
Record keeping for business
When you are keeping business records (UK) as a contractor there may be other company records to maintain, such as:
- Employee records including personal details such as national insurance numbers.
This article will focus on business record keeping tips in terms of how to keep bookkeeping records for a small business, including financial record keeping. This is an especially important read for someone who is starting a business and keeping records for the first time.
Let’s suppose you are a sole trader or a contractor company director starting up your own company for the first time. In that case, it is essential to know, from the outset about company record keeping. This includes which records you should retain. It also includes how to update and look after your business record keeping on an ongoing basis.
Maintain business records (UK) -how to keep accounting records for small business
When you are maintaining business records and organise these well, this will stand you in good stead. When we consider how to maintain records, if you keep up to this and ensure that the records are accurate, it will give you a good overall view of your company’s financial position. Indeed, when you are keeping business accounts and these are accurate and up to date you can view these at any moment in time, should you need to.
It should be every contractor and small business owner’s aim to maintain accounts record keeping to a high standard. Indeed, keeping business records up to date is quite important. When you do so, you will have accurate data for you or your accountant to:
- Complete your business accounts for the company financial year and a company tax return.
- Complete your tax return for the personal tax year with income details from your business and any other personal income details.
When you conform to the above it will help you and your business stay on the right side of the various tax offices.
Online software and being well organised
If you are using an online accounting digital service, such as FreeAgent, that is compliant with Making Tax Digital; this will make your updating easier. This is compared to using a contractor bookkeeping spreadsheet which was the usual way in the past. A digital platform is, in effect, bookkeeping software online and this is a good way to maintain business records. When you use a digital service, it will help streamline your business’ bookkeeping and accounting.
Besides showing key data such as your Balance Sheet and cash flow, bookkeeping software makes updating your business records with its financial transactions much easier than using a small business spreadsheet (UK) type system. Therefore, digital software helps you with business record keeping more effectively regarding your business’s financial information.
Making Tax Digital (MTD) is now compulsory for VAT record keeping and filing VAT returns. In addition, it will also extend into other financial reporting areas in the future. The near future plans include MTD for landlords and Self Assessment is also on the horizon.
It is an excellent way to start if you organise your company well from the outset. It would help if you always aim to manage your accounts and small business bookkeeping effectively throughout the financial year. Your contractor accountant can help and advise you here.
Maintain business records -the types of records to keep
As part of keeping accounts for small business, what records should you keep? Your contracting company’s records and types of information that you should keep are not set out by HMRC. However, these include:
- Invoices or remittance advice for your services or sales.
- Company credit card statements.
- Payroll information (payroll records) you have a PAYE scheme.
Maintain business records -keeping up with it
When you maintain your business records, it is a good idea to set up a process. This process or processes will be for your record keeping and you should stick to this from day one. While maintaining and keeping business records, you can spend fifteen minutes per month organising things and completing any necessary updates. If you complete your business record keeping processes each month, it is an excellent way to keep on top of it. Letting it slip will leave you several months to catch up on all at once.
You could keep the actual small business bookkeeping on an Excel-type spreadsheet. You can also keep them on a digital service such as FreeAgent, especially if you need to maintain VAT record keeping.
Your invoices and receipts, and mileage records should be kept either on a manual or electronic basis. You can also use a mixture of these storage methods.
If you use a spreadsheet, you should ensure that you save both the bookkeeping spreadsheet and the actual records in a safe place. It is also wise to make a spare backup.
Bookkeeping records -small business -moving online
Today, you can still use a contractor bookkeeping spreadsheet on Excel or another system if you are not VAT registered. You can use this to maintain business records for your business. However, since Spring 2019, if you are VAT registered you need to maintain VAT record keeping on a digital system like FreeAgent. There are many other digital systems out there, however FreeAgent is very popular with contractors and small businesses.
FreeAgent and other online systems also help improve how businesses update their books. These are also a much more efficient way to maintain your VAT record keeping. This is because they help keep the business up to date as they link directly to your company’s bank account. With a digital system, you should also be able to update your records on the go. Most, if not all, have an app which you can download to your smartphone.
When you have your records on the cloud, this will also mean they are up to date with the latest bank information at any time. You can link your bank account to the software. As part of this, you can see a snapshot of your company’s finances at any time, wherever you are at any given time.
Maintain business records -how long to keep financial records for a business (UK)
As part of your small business record keeping you should be aware of how long to keep your records. Therefore, let us consider how long to keep tax records (UK limited company) for your business.
As a UK contractor or UK business owner, when we look at how long to keep business records (UK), the rule in place is six years. Therefore, you need to be keeping accounting records for each of your accounting periods for a minimum of six years. Accounting periods usually cover a year; therefore, for the year to 30 June 2023, you would need to keep the records safe until July 2029.
The purpose of saving your accounting records for six years is that you may have a VAT, PAYE, or Corporation Tax review by HMRC in the future. They will need to see your records if you undergo an HMRC review. Once the six years have gone by, you can destroy the records.
As part of keeping business records, most contractors nowadays use a digital platform such as FreeAgent. They will update and maintain business records on here on an ongoing basis. However, some who are not VAT-registered prefer to use a contractor bookkeeping spreadsheet.
When you are well-organised and keep good business records, it will stand you in good stead for your contractor accountant. It will also assist for your own reasons if you need to refer back to something in the future. If your records are well organised, it is easier to locate past transactions if a query arises. Finally, it is also important to have organised and accurate records in case HMRC ever do a review in the future.
Link to Contractor Advice UK group on