>Do you know which records the law says you need to keep?
Whether you work for yourself or you run a small business employing others, good record-keeping has a number of benefits. For starters, if your records are up-to-date, it makes filling in your tax return easier and could help you avoid paying too much tax. Keeping track of your income and expenses will also help you budget for any tax you owe. And it can also help reduce your accountant’s fees, if you use one, as well-organised information saves them time too.
Up-to-date records also give you the information you need to manage your business and help it grow. They will make it easier to get a loan, if you need one, and may support your claim to some tax reliefs or capital allowances.
Invoices, receipts and deductions
You should keep invoices and receipts to show what you have bought or sold relating to your business. If you are employing others, you must keep records of their wages and the tax and National Insurance you have deducted and paid to HM Revenue & Customs (HMRC). You need to show clearly what you have spent personally and what you have spent on your business.
If you use cash, you should retain till receipts and a record book to keep track of it all. If you are using part of your home for business then you should keep copies of utility bills, so that you can work out the amount spent in relation to your business.
Update information regularly
You should update the information regularly – if you don’t you may face a penalty for failing to keep adequate records.
What records do I need to keep?
Whether you are just starting out in business or you are already up and running, Business Link’s online record checker will tell you which records you need to keep and give you feedback on any improvements you need to make. Go to www.businesslink.gov.uk/recordkeepingcheck.
There is a basic factsheet on record-keeping that covers self employment, contracting in the construction industry scheme, partnerships, VAT, employers and limited companies. See www.hmrc.gov.uk/factsheet/record-keeping.pdf
Detailed guidance on record-keeping – covering what type of records you may have to keep, common problems and examples for different types of business – can be found at www.hmrc.gov.uk/sa/rk-bk1.pdf