Keeping Record

How long do I need to keep records

The first lesson on keeping records is have a filing system – there is no point in keeping everything if you can not find anything. Electronic files are good for business records and many personal ones, however there are still some records that need to be physical e.g. passport. And whatever systems you use it has to be accessible in a timely manner.

Here are some notes to help you in your filing.

Filing based on access requirements

Some records may need accessing on a regular basis – current records.  These want to be readily accessible and up to date e.g. drivers licence, debtors and creditors files, current insurance documents (including last renewal notice), regular contact details.

Some may need to be kept for a long time but are seldom accessed – permanent records.  These want to be kept somewhere safe and secure away from damage, as proof of ownership or entitlement etc e.g. share certificates, purchase documents for expensive assets such as house or computer, guarantees, loan agreements.

Others can be archived and may need keeping in case of enquiry or claim etc. but otherwise are unlikely to be accessed – Archived records. These can be consigned to storage e.g. bank statements and business records, vehicle maintenance records,

Regulations

Some records have rules as to how long they must be retained.

Business Records must be kept for up to 6 years after the end of the business year.  That is records used for preparing the accounts whether company accounts, sole trader accounts, or rental account. i.e. sale invoices, bills, and bank statements etc.  Current year records may be required by the accountant, but after the accounts have been prepared then the records may be archived.

Personal income records must be kept for 6 years per above if you are in business, or 2 years if you are not – that is all records used or required for the preparation of your person tax return regardless of whether you are asked to prepare a return or not.  This includes proceeds from the sale of assets i.e. capital gains, as well as details of expenses, costs or tax reliefs being claimed.

Payroll records must be kept for 3 years, after the end of the tax year.

But it is 6 years for details to support.

• Minimum wages calculations
• Workplace pensions
• Holiday pay calculations

And employee ID, tax onboarding, contract and contact details etc remain current for the duration of that employee’s employment, so must not be archived and must be kept up to date.

Evidence to claim costs or reliefs.

There are lots of reasons why you may wish to keep records to support possible or anticipated future claims, and that means keeping those records until at least that claim has been made and maybe even later.

Insurances and Product Guarantees – what do you need to retain to claim? the guarantee, purchase records, Insurance company name and reference numbers, renewal documents etc.

Capital Gains– to claim a deduction from proceeds on the sale of an asset, you need to keep evidence of purchase costs, improvement costs, and the costs of purchase e.g. solicitors costs.

• For shares this can included the total history from the date you first owned shares in that company, including buyouts, partial sales etc. For some holdings this can be a big file including accumulation dividends or drip purchases of shares from dividends.
• For crypto currency, the rules are the same as for shares.
• For inherited assets this can be probate details
• If you have made losses then details for a further claim to offset those losses at an unknown future date

Capital Gains tax reliefs – to claim relief you may need to keep evidence of entitlement to that relief.

• This may be details of the proportion of the asset/company you own or type of ownership e.g. partnership or share agreements.
• For shares it may be value or status of the company – at purchase or later
• For some reliefs it may be special purchase certificate etc e.g. venture capital
• For property this may include the use of the property, and even the use by tenants,
• For property it may include details and history of principal private residence elections
• For some reliefs it may include history of relief claims e.g. lifetime allowances

Inheritance Tax Reliefs – if you do not keep records then your executors may have a big problem to compile the records and returns required to claim reliefs or defend HMRC claims for additional tax.

• Location of a valid Will
• Lists, details of assets held.
• Details of any loans, including consequences on death
• Details of pension and life insurance policies
• Records of what, when and to whom gifts were made that may be subject to tax-free gift allowances – for up to 14 years prior to death.
• To claim relief for regular gifts out of surplus income then personal Income and personal expenses for each tax year – for up to 7 years prior to death
• Details and certificates of spouses(s), births, marriages, divorces, and deaths
• Details of deceased spouses estate for inheritance tax, and reliefs claimed then.

Pensions & Life insurance investments or similar– keep details and contact details up to date, so they can be claimed – probably as part of permanent records.

Medical records – details of diagnosis may be required to claim VAT relief, free eye care, or prescriptions etc.   Details of medication may be required to travel abroad.

Proof of ID etc for Money Laundering Regulations

Current records may be your passport or driving licence and recent council tax or utility bills – less than 3 months old.

Details and certificates of birth, marriages, divorces etc may come into permanent records.

Archived records may include details of sums received in excess of £10,000, evidence of where they came from and what you did with them.  If the cash is still in the bank, then they may still be required.

The above is just a flavour of what records should be kept.  There is no problem with keeping more but filing is the key.