how long to keep accounting records and financial records

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Introduction 

What’s the director duties (UK) for an individual who runs their own contractor limited company? In addition, what’s the role of contractor as a company director and what does this entail? Basically, as a UK contracting professional, we’ll need to look at what’s your official UK company director responsibilities and obligations. Indeed, when you’re a limited company contractor and a UK director, you should be aware of several Companies House director responsibilities and duties. Furthermore, contractors and UK company directors have to keep up with these UK director responsibilities on an ongoing basis. In this guide, we’ll consider what’s the responsibilities of directors in a company. We’ll also look into your actual director’s duties (UK) as a UK contractor with your own limited company.

If you set up your company for the first time, you should be aware of how long to keep business records (UK) for. What’s more, besides knowing how long to keep limited company records, you should also understand how to maintain your accounting records.

You may work as a contractor running your own company. On the other hand, you may be a self-employed freelancer, or you may work through an umbrella company. In both cases it’s key that you’re aware of how long should a contractor keep business records and when you can eventually dispose of these.

Initial thoughts on how long to keep accounting records

Why you need good accounting records to satisfy HMRC 

Every company has a financial year end. As a result, the business accounts and financial statements are made up to each company financial year end date. Likewise, as an individual, the personal tax year ends on 5 April each year. In terms of filing, a company will file accounts with Companies House and both accounts and company tax return with HMRC once per annum. What’s more, an individual will file a tax return with HMRC every year too. Therefore, the year of accounts or tax return year represent a year’s worth of financial information. When you need to report your profits or income annually to the authorities as a business or personally, you also need to store your contractor records safe for those periods of time that your records relate to.

When we consider the storage of your business accounting documents, whichever way you perform your work, through your own company or self-employed sole trader, as part of your small business bookkeeping, you should aim to keep good accounting records for each company financial year. This is important as the tax office may need to review your contractor accounting records at a later date. On the other hand, you may need to check back on something from a prior year. What’s more, a HMRC Compliance Check (tax inspection) can occur at any time during the calendar year. Therefore, you should’ve good accurate accounting records so they can be inspected with ease.

How long to keep financial records for a business (UK)? Basically, you should keep the business records in a safe place for a certain amount of time. However, how long do you have to keep business records (UK) depends on the tax type that the records relate to. 

Common questions

Many small business owners and contractors alike will have questions when it comes to storing their company records. Therefore, here’s a few examples:

  • How long are you supposed to keep bank statements?
  • How long do you keep accounts for?
  • As a taxpayer, how long to keep personal financial records (UK)?
  • How many years do you have to keep business records?
  • How many years accounts do I need to keep?

Therefore, in this guide we’ll take a good look at all of the above and find out how long to retain business and personal tax records.

Making Tax Digital and online accounting software

With the advent of the internet and, more recently, Making Tax Digital, many UK contractors and small businesses now store their records online or part online/part offline. They’ll also use online contractor accounting software (UK) in many cases for their digital business records. This contrasts with before the age of technology when most business record keeping was kept offline in paper format.

Statutory records

Besides business and tax records, a company must also keep statutory records. These company records are usually maintained by your accountant, and contain details on directors, shareholders and other official data.

How long do you have to keep records for HMRC 

What to consider first 

When we consider how long do you need to keep business records (UK), it’s essential to note that the main reason is HM Revenue & Customs (HMRC). This is because they may need to inspect the documents later. Indeed, such an inspection could come up at any time. Therefore, let’s consider accounting records storage and how long you should retain this in terms of length of time.

When we research how long to keep financial records for a business (UK), the length of time you should keep your records for, are shown below.

How long to keep company records (UK)

How long should a contractor keep records for their UK limited company? Let’s consider, when storing company accounting records, how long to keep business bank statements and other accounting records for? Basically, a company director must store business records for their limited company in a safe place. Therefore, when it comes to how long to keep business bank statements (UK) and other bookkeeping records for, these should be kept for at least six years for each of your accounting periods, after the end of the accounts year to which they relate.

How long to keep Self Assessment tax records (UK)

When we look at how long to keep tax records (UK) for Self Assessment, sole traders and self-employed people need to keep their records for five years for income tax purposes from the end of the tax year that the records relate.

People who work via an umbrella company also need to keep their personal tax records as they’re employees, not business owners. The individual tax filing deadline is 31 January; however, the personal tax year ends on 5 April. Therefore, records covering the year to 5 April will need to be retained.

When considering how long to retain tax records, an individual’s personal tax records will include income details such as employment, interest income, pension income, rental income and expenses, dividend income, government support such as Universal Credit, foreign income, and any capital gains information. Therefore, when we consider how long to keep personal tax records (UK) for, they should be retained for 22 months from the end of the tax year to which they relate.

How long to keep accounting records -employer (UK) records

If you’re an employer and run a PAYE scheme, how long do I need to keep payroll records for? Basically, when we look at how long to keep payroll records and what to keep, such records will include the amounts the company deducts for tax purposes and National Insurance. This’ll also include any statutory payments for sick pay and maternity pay. Therefore, you should save these files and records in a safe place for at least three years.

How long to keep accounting records -an overview 

Keep and dispose of your records

As we show above, when considering accounting and business records storage, depending on the types of records, you need to keep them for different lengths of time. Therefore, keeping business records and documents for six years makes sense. You can then dispose of the relevant tax year or accounting year records, year by year once you’ve kept them for the required amount of time. 

Do I need to keep paper records for HMRC 

Nowadays, a lot of business accounting details e.g., banking, invoices etc are kept online. Therefore, if you’ have the records either online or manually, this should suffice for HMRC. If you do receive any paper invoices or receipts from suppliers, you could scan these and save them online too if you like, however it’s advisable to keep the originals too.

How long to keep business records -the reasons why 

As part of our research on retaining accounting information and how long to keep financial records (UK), there’s plenty of reasons to keep your business and tax records for each financial year. These are in addition to the legal reasons that we mentioned above.

A common reason for the owner of a contractor limited company or any other business, is you may wish to check back on something I your previous records at a later date. This could be for your own purposes, if a query arises.

Most limited company contractors now use online software systems to do their small business bookkeeping. Therefore, when we look at how long do you have to keep financial records, most of their records are now online. On the other hand, they may also have some documents, such as receipts, kept offline.

How long to keep business documents -which records should you keep in a safe place? 

As part of the process, when you consider how long do you have to keep business records, you need to keep certain types of business records and documents in a safe place. Therefore, your contractor accounting records include:

  • The first item in a contractor’s records will be any cash books or spreadsheets that you used to record your business transactions.
  • Bank statements for all company bank accounts and any company credit card accounts. If you’ve gone paperless, you can access these online. However, banks only keep history for so long though. Therefore, you may decide to print out your statements. As another option, you can download the statements and save these on your computer.
  • Sales invoices for your services and sale of any goods.
  • Invoices or receipts for purchases/expenditures. Nowadays, many suppliers will send a receipt to your e-mail address to save paper. Therefore, any invoices or receipts you’ve received electronically could be printed out, or, again, you can keep these on your computer.
  • Part of your contractor books will include any business mileage records. Indeed, this should contain dates travelled, details of journeys made, the reason for the trip and the number of miles.
  • The details of any PAYE records. Basically, this would include your payroll workings, payslips, workings for any sick pay, maternity pay, etc.
  • Details of all your business’ assets and liabilities.
  • In the past, you’d also keep copies of VAT returns. Today, you can save these online when using a digital software system.
  • Details of any financial charges secured against the company’s assets.
  • Minutes of board meetings. In some cases, when there is a board meeting, your accountant make keep a copy of this in the company’s statutory registers.

Other areas to consider

How long to keep accounting records for a business -tax enquiries 

As a business owner, various Compliance Checks or enquiries from the tax office could come around from time to time. If this occurs, HMRC will need to view your company records:

  • HMRC may decide to conduct a VAT inspection. As part of this, they may investigate the business VAT records and the amounts that make up recent VAT returns.
  • The tax office could also carry out a Corporation Tax When they do this, they may look into the figures which make up last year’s company tax return.
  • HMRC may also perform a routine PAYE inspection.

You must make your business records available in each case, at their request.

How long to keep accounting records for personal tax -HMRC enquiries 

HMRC may decide to conduct a Self Assessment enquiry into your last few tax returns or your latest return. In this case, you’ll need to make your tax records available to them at their request.

How long to keep accounting records -HMRC inspection

As the result of an HMRC inspection for any of the above, the tax office may find that the amount of tax you or your company have paid is incorrect. As a result, they may issue an assessment requesting extra tax that needs to be paid. On the other hand, if they find that you’ve paid too much tax, HMRC will arrange a refund.

How long do you have to keep records for a closed business (UK)

When we consider this, the same timeframes apply as we outline above. Therefore, for limited company accounting records, it’s six years and for the other types of taxes etc it’s the same as we mention above. 

Final thoughts

When we look into how long do you have to keep business records (UK) the general rule is six years. However, when we consider storing financial documents, there are other time periods for different types of records as summarised earlier.

We hope you found this a worthwhile read when considering how long to keep financial records for a business (UK). Basically, we cover how long to keep accounting records and how long to keep tax records (UK). What’s more, we cover how long to keep business records in general. When you know how long you should retain your accounting records and documents, this puts you in good stead so that no unnecessary issues occur further down the line.

Link to Contractor Advice UK group on LinkedIn

https://www.linkedin.com/groups/4660081/

Published On: January 4th, 2024 / Categories: First timer guide, Most Read Articles, Record Keeping /

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