Running your own business is full of difficult yet exciting challenges, however, with so much going on at once it’s easy to let the simple tasks slip by unnoticed. With all the paperwork, e-mail trails and software changes that come along with running your own business it can be near impossible to know what is junk and what must be kept safe. Below we’ll try to clear up the basics so that you always have the essential information to hand when you need it.
Firstly, if you’re ever in doubt about whether you must keep something or if you’re OK to bin it then we’d always recommend playing it safe. Bring in a copy or scan it across to your accountant and they’ll be able to keep you on the right track. At Moulds & Co Accountants we do our best to ensure you fully understand all of your accounts from top to bottom, meaning that you’ll never throw away anything that you’ll later need.
What needs to be kept?
As a rule of thumb, you need to keep records that underpin any accounts prepared for your business, and/or any tax returns you have submitted to HMRC.
What does “records” entail?
Records you will need to keep include proof of sales and business income, all business expenses, VAT records if you are VAT registered, payroll records if you employ anyone, and also records of your personal income. This includes: all receipts for business and stock purchases, bank statements and cheque book stubs, sales invoices, till rolls and bank paying in slips.
Does the same apply for Limited Companies?
If your business is a limited company, you must also keep records about your directors and shareholders and other statutory information.
Many small businesses use accounts software to record their business transactions. If so, care should be taken to keep copies of each year’s accounts data.
How long should this information be kept?
If you are self-employed, you should keep records for 5 years after the filing deadline for a particular tax return and for a limited company this extends to 6 years.
For example, the filing deadline for the 2018-19 self-assessment tax return is 31 January 2020, so a sole trader should keep records until 31 January 2025 whereas a limited company will want to keep these records until 31 January 2026.
Back up! Back up! Back up! It’s a fact of life that accidents happen, whether it be simply misplacing a few papers or something much bigger and more difficult to foresee or control. Keeping your records and other essential business information backed up is a no brainer and that little bit of extra effort can make all the difference.
For extra security be sure to back up your information twice and keep one of these in a separate physical location to the other. That way, if the worst happens you’ll be more than prepared for it.