Whether you work as a contractor for a company or as a self-employed freelancer, it’s critical that you understand how long to keep accounting records for your work.

The length of time can vary depending on your business structure – whether you run a limited company or are self-employed. Employers also have specific liabilities with regards to the retention of documents.

HMRC can impose severe fines for businesses that don’t present accounting and business records – and these penalties can sometimes add up to thousands of pounds.

How long to keep accounting records in the UK: self-employed

Sole traders and people in unincorporated business partnerships need to keep their accounting records for a minimum of five years following the 31st January of the applicable financial year.

You’ll need to retain:

  • Business expenses
  • Personal income
  • Sales records
  • Money paid into/withdrawn from the company
  • VAT and PAYE info (if appropriate)

If you face an HMRC investigation, you’re required to keep the above documentation until HMRC tells you otherwise. 

In every case, the mandatory documents are typically sales receipts, bank statements, purchase invoices, VAT records and cheque book stubs.

If you’ve obtained a government grant, keep the evidence for four years from the date you received it.

How long to keep accounting records: limited company

When it comes to a limited company, the rules are slightly different and there’s more documentation to think about. 

As well as the documents stated above, you – as the director of a limited company – must keep other records such as:

  • Liabilities
  • The company’s assets
  • Shareholder transactions
  • Loans secured against the business assets

Mostly, though, limited company directors must keep documentation for roughly six years from the end of the financial period. 

That said, you’ll need to keep several record types for 10 years, including: 

  • VAT MOSS (Mini One Stop Shop) documents
  • Your firm’s statutory books (you need to keep the company register showing your company’s duration in business)
  • Transcripts of board meetings and resolutions

How long do I need to keep accounting records if I’m an employer?

Employers need to retain PAYE documents for three years from the finish of the last financial year they relate to.

However, this could be longer if they show a transaction that covers more than one company accounting period. 

So, be sure to keep the following records:

  • Tax code notices
  • Details of staff leave and illness
  • Any taxable benefits or expenses
  • Payments to HMRC and staff

What if accounting records aren’t stored?

Tell HMRC straightaway if any business documentation has been lost or stolen. 

It’s possible they’ll ask you to recreate these records. However, you may face fines of about £3,000 if you cannot present HMRC with the necessary documents.

Need help? Reach out to a professional

Need more advice on which documentation to retain and how long to keep accounting records? Contact one of our expert chartered accountants today – we’re happy to help.