Accurate accounting records are an essential part of running a business. Failure to keep track of your accounts can lead to chaos within your business, as well as serious legal repercussions if you are not paying the right amount of tax.
It is important to keep accounting records safe for a number of years, but how long should you be keeping accounting records for your business? If you want to know more about how long to keep accounting records and the importance of doing so, see below for our handy guide.
What do accounting records include?
If you are running a limited company, you must keep accurate accounting records that include:
- Records of all sales and income (including cash receipts, till rolls, sales invoices, and bank statements)
- Records of all purchases and expenses
- VAT records
- PAYE records
- 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 stocktaking you used to work out the stock figure
- Statements of goods and services bought and sold, other than by ordinary retail trade. This should include a list of the goods, buyers, and sellers
- Copies of past annual accounts, Company Tax Returns, and Self-Assessment tax returns.
The importance of keeping accounting records
A business has a legal obligation to keep accurate accounting records and you can be fined £3,000 by HMRC or disqualified as a company director for failure to do so. There are many other important reasons to keep accounting records, such as:
- If HMRC decides to investigate your business affairs, you will need to produce accounting records for the inspector
- They provide an accurate record for your own personal use, especially if you need to double-check a transaction
- To show and explain the company’s transactions and to disclose with reasonable accuracy, at any time, the financial position of the company at that time
- Accurate records help to maximize all the expenses you claim and reduce your tax obligations
- Records can help you plan for business growth and identify any strengths or weaknesses within the company.
How long do I need to keep company records?
If you are a limited company owner, you must keep records for at least six years from the end of the last company financial year. You will need to keep records for longer if:
- They show a transaction that covers more than one of the company’s accounting periods
- The company has bought something that it expects to last more than 6 years, like equipment or machinery
- You sent your Company Tax Return late
- HMRC has started a compliance check into your Company Tax Return.
If you are also an employer, you will need to keep all PAYE records for three years (in addition to the current year). If you operate through your own company and pay yourself (and/or others) a salary, then you are classed as an employer. You will need to keep records of all deductions made from employees’ pay, benefits, expenses, and any statutory payments.
How to store accounting records safely
There is no law that dictates how you should keep your business and accounting records, but you will need to keep some original documents to show that tax has been deducted, e.g., P60s. It is good practice to keep a copy of all original documents you receive, and you will need to keep CIS vouchers, dividend vouchers, and bank interest certificates in their original format.
Most records can be safely stored electronically, and this makes it much easier to keep track of your accounts. Cloud-based accounting software is a popular option, and it encrypts data in the same way that banks do for added security. Install anti-virus software on your devices and do not forget to make backup copies in case any original records are lost or destroyed.
Professional bookkeeping services from Ayoks Consulting
If you are looking for a professional to keep your accountancy and finance records in order, consider bookkeeping services from Ayoks Consulting. We work with a range of businesses across the UK, helping them to increase their efficiency and accuracy, so you can spend more time on the day-to-day running of your business.
Our ordered system results in clear files and transparency in communication between us and your business, saving time and money when your returns are due. We can also offer advice on VAT, as well as any tax planning issues you may have, Contact us today to find out more about the benefits of bookkeeping for your business.