It is important that anyone who is self employed maintains the correct records but for many, this can prove challenging. It can be confusing and frustrating but this does not mean that the task should be avoided.
So, the aim is to explore the records that you should keep as well as the way in which you store them and how long you should store them for. Furthermore, by following our guide, you will remain organised and will be able to maintain accurate records.
Accounting Records to Keep?
Sales – All sales or income should be kept. This can include bank statements, invoices and even payments made through third-party apps.
Purchases and Expenses – This will include everything that you purchase and pay for. This can range from small office equipment to large electrical items and even utility bills. All of this information could come in handy for insurance or even tax payments or claims.
Assets – If you purchase anything that holds a certain value and is used by your business, you should keep a record of it. This can include electrical equipment, computers and machinery as all of these can become part of your tax payments.
Adding funds or deducting funds – If you add money into the business or withdraw money, then you will need to record this. These are transactions that can grab the attention of HMRC
Mileage – If your expenses include travel and fel, then you will need to provide proof of when you undertook the journey. You will also need to record the distance you travelled, the time it took, where you went and the reason for the journey.
How Should Accounting Records Be Stored and Recorded?
Your aim is to ensure that you remain organised. The best approach for this is to place each record into a monthly folder or file. At the end of the financial year, you will have a full year of records that are in order. If you adopt this approach, everything should be recorded as soon as possible while you should look to make duplicates for large financial transactions such as purchasing an asset or withdrawing money.
How Long Should Accounting Records Be Stored For?
HMRC says that records should be kept for a minimum of five years after the submission deadline of 31 January for that relevant tax year. So, remember that your records are not kept based on the date on the individual record but it is from the submission date from the following submission date. However, you don’t have to keep them for five years because you can keep them for longer if you choose to.
Why is it Vital to Keep Accounting Records?
If you are a business that has physical goods then this is a good way of managing stock levels at the end of the year for tax reasons. Furthermore, it can also help when making an insurance claim as the right records would enable you to prove that any assets that are stolen or damaged were owned by the company. Finally, you don’t want to be accused of tax fraud which is where organised and well-maintained records can really make a difference. This will allow you to find all of the required records as proof you have paid the correct taxes.
So, it might be challenging and time-consuming to maintain and manage your own records but it certainly makes sense to stay on top of things.