We know that dealing with the financial side of your business isn’t always the most exciting or exhilarating process. However, it is critical in ensuring your business is well equipped and successful. Knowing what receipts to bin or keep can be a tricky task to unfold but we have come up with some top tips regarding what receipts to keep and why they are needed.
What receipts do I need to keep?
As a small business or sole trader, holding on to as many receipts as you can is a very good idea. Through doing so, an accurate depiction of your businesses current financial situation can be made which will make the tax return process run smoothly as well preparing you for any questions HMRC might have in relation to your businesses finances.
With that being said, there is a list of receipts that HMRC recommends you hold on to:
– Bank statements
– Any expenses relating to your business
– Sales invoices
– Records of your own personal income
– Create a mileage log – must include correct dates, miles travelled and start and
end point of trip (if you want to claim mileage back)
– VAT records
– Staff PAYE records
Do I need to keep physical receipts?
Who wants stacks and stacks of paper receipts all over the place? Certainly not us and we doubt you do either! Don’t panic!! Although HMRC requires you to keep an extensive list of receipts, the majority of them can be kept digitally. Luckily HMRC are not too bothered about the format of your receipts, as long as the info they need is displayed clearly (they may penalise you if this is not done!).
Therefore, it might be a good idea to create different folders on your computer which help you separate and organise your different receipts so they can be easily found when needed.
However, it is worth noting that if you obtain a document which displays a direct tax deduction (not including VAT), you will be required by HMRC to provide a physical receipt.
How long do I need to keep receipts?
It is a common misconception that once the financial year is over, businesses can get rid of financial records in relation to the previous year. Different to what some might think, HMRC requires businesses to keep their financial records for at least 5 years after the 31st January Self Assessment tax return deadline for the given year.
In some instances which we will list below, they will need to be kept for longer:
– HMRC have decided to check through your records (they can go back up to 20 years if there is something they are concerned about)
– You are buying and selling assets
– You filed your tax return late
Moral of the story here is, just try and keep your financial records and receipts safe and sound for as long as possible!
We hope that we have answered some of the top questions regarding financial records, receipts etc and have made the process a less daunting experience for all of you reading this. If you have any further questions or require any advice, please do not hesitate to get in touch! Our team is always more than happy to help.