Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
What are HMRC’s rules on record keeping?
So that you are able to fill in your Self Assessment tax return, HMRC expect you to keep good records of your finances. You will need these records to be able to complete your tax return accurately and completely. HMRC also have the right to ask to check your documents to ensure that your tax return is correct – they won’t ask to check them each time you submit your Self Assessment tax return but they could if they so wished, so you have to be able to prove to HMRC that your tax return is an accurate reflection of your taxes. If you are self-employed, you also have to keep records for your business incomings and outgoings so that you can prove how much you have earned and how much tax relief you are entitled to claim.
HMRC don’t set any rules on how you should keep your records. You can keep paper copies, store them digitally or keep them online using a tax an accounting software application – whichever way works best for you and your financial circumstances. However, if HMRC feel that your records haven’t been kept correctly they can issue you with a penalty charge – so if your records aren’t complete, accurate or readable, you might get hit with an HMRC penalty.
What happens if your records have been lost or destroyed?
Unfortunately, you can’t use the old “dog ate my tax records” excuse not to keep or provide HMRC with accurate records of your finances. But HMRC does recognise that sometimes financial records can be lost or destroyed – maybe you have moved house and your records have gone astray or you have suffered a fire or some other disaster has befallen your home, taking your financial records with it. In these instances, there are ways around this to make sure you can still complete your Self Assessment tax return.
You will be able to get copies of some of your records, such as bank statements or supplier invoices, by contacting the organisation who originally sent you the record and asking for a duplicate. If you aren’t able to recreate all your records, you are able to use ‘provisional’ or ‘estimated’ figures but you do need to inform HMRC that you are using provisional or estimated figures – you need to use the “Any other information” box to inform HMRC that your figures aren’t exact.
‘Estimated’ figures are those that you won’t be able to confirm later, for example, by getting duplicate paperwork. ‘Provisional’ figures are those which you will be able to confirm at a later date, once you have received the duplicated bank statements or other paperwork.
If you use estimated or provisional figures and it is discovered later that your figures are wrong, HMRC can issue penalties and charge you interest if you haven’t paid enough tax.
How long do you have to keep your records for?
HMRC rules state that how long you need to keep your records depends on whether you submitted your Self Assessment tax return on or before the deadline, or whether it was a late submission. However, if you are self-employed, you need to keep your records for even longer. Don’t forget that HMRC have the right to request to check your records to make sure your tax return was correct and you are paying enough tax.
If your Self Assessment tax return was submitted on or before the deadline, you need to keep your records for at least 22 months after the end of the tax year your Self Assessment tax return was for. So if, for example, you submitted your online tax return for tax year 2014/15 by 31st January 2016 (the deadline for that tax year), you would need to keep the supporting records for that tax year until at least the end of January 2017.
If you submit your tax return late, you need to keep those supporting records for at least 15 months after the date you submitted the Self Assessment tax return.
Businesses and self-employed people need to keep their records for longer – usually for at least 5 years.
What kind of records should you be keeping?
What kind of supporting records you need to keep for your Self Assessment tax return depends on your employment status. You will need to keep hold of different records if you are an employee than if you are a limited company director or self-employed freelancer.
You should keep hold of the following information from your employment:
- Your P45, if you have left a job during that tax year
- Your P60, which will show how much you earned and how much tax you paid that particular tax year. If you are in employment on 5th April, you will receive a P60 for that tax year
- Your P11D form, which will show any expenses or benefits you have received from your employment, such as a company car or private medical insurance
- Information relating to any redundancy or termination payments you may have received during the tax year
- Certificates relating to any Taxed Award Schemes you have benefited from
- Any tips you receive as part of your job (unless your employer pays them through a ‘tronc’ system where they have already deducted the tax)
- Any benefits you may get as part of your job which don’t come from your employer – if you receive meal vouchers, for example
- Any lump sum payments you might receive which aren’t shown on your P45 or P60, such as a ‘golden hello’ or ‘golden handshake’ type of payment.
- Any other documents you may have received about your pay or tax.
If you don’t have your P45, P60 or P11D, you need to contact your employer.
If you are claiming tax relief on any of your expenses, you will need to keep records of those expenses. So if you buy essential tools to perform your employment duties, or you have costs relating to a uniform you have to wear, you will need to keep records to prove your out-of-pocket expenses. If you claim tax relief on these expenses, it will reduce the amount of tax you will have to pay but you will have to prove to HMRC that you incurred these expenses in the first place so you will need to keep a hold of receipts and invoices and that type of supporting information.
If you receive any benefits, you need to keep hold of any documents relating to the following benefits:
- Jobseeker’s Allowance (JA)
- Statutory Sick Pay (SSP)
- Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) or Statutory Adoption Pay (SAP).
- Any social security benefits
If you receive any income from employee share schemes or share-related benefits, you need to keep records related to that income too. The records you need to keep may include:
- Copies of share option certificates and exercise notices
- Details of any benefits you have received as an employee shareholder
- Information about what you paid for those shares and any relevant dates
- Letters about any changes to your share options
Do you need to keep savings, investment or pension records?
HMRC may ask to see evidence of your savings and investments so you will need to keep the following information to support your Self Assessment tax return:
- Bank and building society statements and passbooks
- Statements detailing any interest or income from your savings or investments
- Tax deduction certificates from your bank
- Dividend vouchers you receive from UK companies
- Unit tax trust vouchers
- Details of any income you receive from a trust
- Details of any income you receive which is out of the ordinary, such as an inheritance
- Documents showing any profits you have made from life insurance policies (these are known as ‘chargeable event certificates’
If you receive a pension, you need to keep the following information to support your Self Assessment tax return:
- Your P160 (Part 1A) form, which you would have received when your pension started
- Your P60, which your pension provider should send you each year
- Any other relevant details about your pensions (including the State Pension) and any tax which is deducted.
What records should you keep for rental income?
If you receive income from renting out property, you need to keep the following records to support your Self Assessment tax return:
- The dates when you let out the property
- All the rent you receive
- Any income you receive from services you provide to your tenants, for example, if you charge your tenants for cleaning or maintenance services
- Rent books, receipts, bank statements and any invoices which relate to the rental income
- Records to support any allowable expenses you are claiming as tax relief, for example, records relating to any services you provide to your tenants.
What records should you keep for your capital gains?
If you have sold (or disposed of in any way) certain assets you may be liable to pay Capital Gains Tax if they have increased in value since you purchased them. Similarly, you may be able to declare a loss on certain assets if they have substantially decreased in value. To work out your gains or losses, you will need to keep the following records:
- Receipts, bills and invoices relating to how much you paid for the asset
- Records relating to any additional costs, such as Stamp Duty, professional advice you have sought, costs relating to improving the asset or valuation fees
- Receipts and other details relating to income you have received for the asset, including compensation if the asset was damaged or instalments you are receiving relating to the sale of the item
- Contracts relating to the purchase or sale of the item, such as documentation from a solicitor or stockbroker
- Copies of any valuations you have had done on the asset
These records need to be kept for at least 5 years if they relate to business assets, rather than personal assets.
What records should you keep for any overseas income you receive?
If you receive any income from overseas, you will need to declare this on your Self Assessment tax return. This means that you need to keep the following documentation to show you are paying the right amount of tax:
- Evidence of the income received from overseas, including income you have earned. These would include payslips, payment confirmations or bank statements
- Receipts for any overseas expenses which you want to claim as tax relief to reduce your tax bill
- Dividend certificates from overseas companies
- Certificates to prove the amount of tax you have already paid, whether overseas or in the UK.
How can DSR Tax Claims help?
We know that working out which tax records you need to keep can be a complicated affair, even with our helpful guide to tell you everything you might need to know. It’s all very well reading about it and knowing what HMRC’s stand on it is – but how do you apply that to your own circumstances? It can seem like an absolute minefield but help is always available and you don’t need to battle through this alone. Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
This page was last updated on 26/10/2018.