How Long Do I Need to Keep Records For?
Record keeping. It's vital in helping with timely and accurate tax returns. It's even more essential to any challenges made by HMRC, with penalties given if your records are incomplete or inaccurate.
So we know we have to do it but organising records can be a confusing task to tackle, one that easily slips down the business to do list. So what are we okay to shred and what do we need to keep hold of? And what happens if we lose a file?
What type of records do we need to keep?
You'll need to keep relevant records to support income or expenses included in your tax return along with any claims or elections made.
This will vary for different taxes and taxpayers so we will share with you some common queries in this blog.
How to keep records:
The good new is paper copies are not required to be kept. This is provided all the required information is captured elsewhere, of course. We recommend storing them electronically in a couple of places: a computer, CD-ROM and USB stick are all good ideas.
Be careful with scanning though! HMRC can charge a penalty if records are not accurate, complete or readable.
What if records are lost or destroyed?
From time to time, records can be lost or destroyed. If this happens, you need to do the following:
· Create estimated or provisional figures to replace them.
· Inform HMRC where estimated figures (your best guess) or provisional figures (temporary estimate while you waiting for the actual figures) are used in your tax return. Use the 'any other information' box to do this. If you're using provisional figures, you'll need to submit the actual figures when they become available.
How long do records need to be kept?
This depends completely on the tax and taxpayer, but here are some useful examples.
Income Tax / Capital Gains Tax: individual (or trust) not carrying on a business
1 year from 31 January following end of tax year
For the 2019/20 tax year: until 31 January 2022
Income Tax / Capital Gains Tax: sole trader or partner (including trustees with business income)
5 years from 31 January following end of tax year
For the 2019/20 tax year: until 31 January 2026
6 years from end of accounting period
For the year ending 31 December 2019: until 31 December 2025
At least 6 years
3 years from end of tax year
For the 2019/20 tax year: until 5 April 2023
Under some circumstances, these deadlines are extended. Here's a list of when the deadline is extended:
· You file your return late.
· A return is subject to an enquiry or compliance check.
· Records relate to a transaction spanning more than one year.
· An asset is bought which is expected to have a life longer than the time limit.
Tip: If you are storing or using personal data, make sure you comply with the Data Protection Act.
We hope this has given you some clarity and guidance on what and how to keep your financial records. For more information and advice, get in touch with Catherine today. Give her a call on 01423 431889 or email email@example.com.
Please note: all stats are accurate for the 2019/20 tax year.