FAQ - Record Keeping for your Tax Return
Tax Returns are a dreaded chore for most self-employed people. There are a lot of things to do when you are running your own business and most people find it difficult to keep on top of their record keeping. Keeping records is the boring part of running a business, but if left to the last minute could cause you a lot of stress. It is best to get to grips with it from the start and have a system in place so that it does not take up to much of your time.
Why DO I need to keep financial records?
There are two main reasons why you need to keep financial records:
To provide accurate and complete figures on your tax return, HMRC can ask for back up for any of your figures on your return and you will need to have the appropriate documentation to hand. HMRC can charge a penalty if your records are not complete, accurate and readable.
You should be keeping income and expenditure records for your business not only for tax purposes but to track the progress of your business. You should track your progress on a monthly basis at least so that you know how your business is doing financially. Then you will have all of your records in order each month and not end up with a whole years worth to sort though under the pressure of the tax return deadline.
How long do I need to keep MY records for?
You need to keep your records for 22 months after the end of the tax year that the return is for. If you sent your tax return after the deadline then you will need to keep them for 15 months after the date you sent in the return.
I have lost/destroyed some of MY records, WHAT NOW?
If you have lost invoices, receipts or banks statements then the first thing you need to do is seek to get copies from the supplier. If you are not able to get copies in time but you will receive them at a later date then you will need to use provisional figures on your return and then state in the ‘any other information’ box that you have used provisional figures. Once you receive the paper work send it on to them.
If you cannot get copies of the documents that have been lost/destroyed then estimate these figures. You will also need to state that you have used estimated figures in the ‘any other information’ box. Estimated figures means that you are unable to confirm these figures.