The oldest surviving manuscript in existence is the Sumerian text from Abu Salabikh from 2600 BCE and if HMRC had its way, they’d want to go back that far to check to see that he paid the correct amount of income tax and National Insurance.

We exaggerate ever so slightly but the length of time you have to keep financial records for the taxman to inspect is often a cause of concern for many of our clients. And that’s not because they’ve done anything wrong – it’s just because our clients want to make sure that they stay on the right side of the law with all their tax affairs.

But what are the rules? In this article, TWP considers how long you should store your records and exactly what it is that you should keep.

There are penalties for getting it wrong

HMRC give no actual firm guidance on the format of the records you should keep – whether they’re paper-based, on an Excel spreadsheet, in an online bookkeeping platform, or with your accountant.

However, if you don’t follow the rules, you could be fined thousands of pounds for getting it wrong plus an estimation of tax they think you might owe because of what they would describe as the inadequacy of the historical records.

Self-employed records

If you are a sole trader or a partner in an unincorporated partnership, HMRC will want to see the following records:

  • What you’ve sold and the money it brought in
  • What you paid, who you paid it to, and what you bought
  • Your VAT and PAYE records
  • Information on your personal drawings
  • What you’ve invested in the business financially (both in cash and assets)
  • Money you’re expecting but you’ve not received yet

They’ll also want your invoices (those you’ve sent and those that have been sent to you), bank statements, paying-in slips, cheque stubs, and till rolls.

The length of time you need to keep them for is 5 years after self-assessment day. So, when you make a payment related to your self-assessment on 31st January 2020, you must keep all your records in an accessible format until the end of January 2025.

Limited companies

As with sole traders and partnerships, HMRC will expect to see:

  • What you’ve sold and the money it brought in
  • What you paid, who you paid it to, and what you bought
  • Your VAT and PAYE records
  • Information on your personal drawings
  • What you’ve invested in the business financially (both in cash and assets)
  • Money you’re expecting but you’ve not received yet

They’ll also require a lot more because limited company and director accounting is much more complicated than sole trader or partnership accounting.

You’ll also need to keep records that the company owns (together with loans and mortgages used to purchase them and on which they’re secured), any debts owed or still owing (including debentures and indemnities), the stock (and how you work out the value of the stock), votes made by shareholders, and transactions made by shareholders.

Limited company records must be kept for at least six years. If your company is part of the VAT MOSS scheme, you’ll be required to keep those records accessible for up to 10 years.

Employee PAYE records

PAYE records generated by your business (whether a sole trader, partnership, or limited company) must be kept for 3 years and include the following:

  • What you paid your staff
  • How much you paid HMRC
  • Any wage deductions and the reason why
  • Tax code notices
  • Taxable benefits
  • Taxable expenses
  • Leave records
  • Sickness records
  • Absence records
  • Payroll Giving Scheme information