If you don’t keep proper records, you may not be able to prove your income and expenses. By keeping proper records, you’ll be able to check that everything’s in order. Support Teams at the IR can help you to understand what records to keep.
Why do I have to keep records?
The law says that everyone who pays tax must keep the records they need to fill in a tax return. By law, you must keep all your records for at least five years from the latest date for sending back your tax return, but it’s up to you to decide how you keep them.
Set up a system in three steps:
It doesn’t matter whether you use a special account book or a software package as long as you set up some kind of system to keep the information together. If you use a computer remember that you must still keep the original receipts.
Keep records throughout the year Keeping only some of your records is almost as bad as keeping none at all. Update your records regularly, rather than letting the paperwork pile up.
- Keep your records for as long as required You must keep all records for at least five years from the latest date for sending back your tax return.
The sort of records you keep will depend on your business. However, the minimum requirement for most types of business will be:
a cash book (a summary and analysis of all bank account entries,cash receipts,payments and drawings)
- a petty cash book (or some other simple record of your petty cash transactions)
If you don’t have a separate business account, you must keep clear records of what is personal or to do with your business. You’ll also need to keep a record of any private money you bring into the business, and where it came from (e.g. a legacy, a loan)