Whether you are working as a contractor, via your own company, or a self-employed freelancer, you must keep your financial records safe for a number of years. Although it may be tempting to do a spring clean of all your business files and paperwork, we recommend that you keep all records for at least six years after the end of the accounting period or tax year.
If you use cloud accounting software, it can give you peace of mind that almost all of your tax records should be safely stored on the Cloud.
The Internal Revenue can randomly audit your return up to three years after the filing date or if it suspects you made an error. Therefore it is important to keep business receipts and bank statements that support tax deductions for three to seven years. This includes anything that proves charitable donations, expenses and other deductions you have made from your business account.
As a guide, you should keep accounting records that include:
- all money received and spent by the company
- details of assets owned by the company
- debts the company owes or is owed
- stock the company owns at the end of the financial year
- the stocktakings you used to work out the stock figure
- all goods bought and sold
- who you bought and sold them to and from (unless you run a retail business)
You can be fined £3,000 by HMRC or even disqualified as a company director if you don’t keep accounting records, so albeit be organised and try to declutter, but know what records are worth keeping.