Is a Jaffa Cake a biscuit or a cake? Now if you think this is some playground joke, think again. This is a real question that judges were asked to consider in a landmark VAT…. Skip to content In this concise guide, we explain which tax records small businesses including the self employed and limited companies should keep, and for how long — according to the prevailing HMRC rules.
But, what about business-related tax records? A record of all purchases and expenses, including cash purchases. PAYE records, if you employ anyone. Limited Companies If you operate via a limited company, you must keep the following records: Accounting records — including details of all assets, liabilities, income and expenditure.
Business records — including bank statements, paying-in books, purchases, expenses and sales details. Your company records, relating to company officials, any company resolutions and meeting notes, and entries on the PSC register People of significant control.
Any records related to employees you have furloughed under the CJRS. UK website has a good example. If that sounds too complex, you can claim simplified expenses instead. If your freelance work requires you to pay a membership fee or would benefit from you purchasing a trade publication, these costs can be claimed back on. However, this does not extend to political party subscriptions.
These are just some of the examples of expenditure that you can claim, but they highlight the wealth of opportunities available to all sole traders — provided they keep the relevant records. Claiming these expenses through your Self Assessment tax return helps to further reduce your tax liability and maximise your take-home pay.
In order to qualify for tax relief, you need to be able to present receipts when asked by HMRC. But to be wholly compliant, expenses aren't the only figures you'll need to report.
In fact, if you're self-employed, you're legally required to keep records of the following:. You won't need to submit all of the above as part of your Self Assessment tax return. However, HMRC may ask you for them should they launch an investigation.
Additionally, it helps you to work out your taxable income when you're filing your self assessment tax return. If HMRC does launch an investigation, you'll need to provide evidence of your finances. This will need to come in the form of:. Only with all of the above will you be able to safely claim any relevant expenses and stay on the right side of the taxman. Hide this message. Part of Set up as self-employed a 'sole trader' : step by step. Business records if you're self-employed. Print entire guide.
Step 1 : Check if being self-employed is right for you. Check what being self-employed means There are other ways to work for yourself. Check if you should set up as one of the following instead: a limited company a partner in a business partnership Get help deciding how to set up your business Get help starting your own business if you're on benefits.
Step 2 : Choose the name you want to trade under. Check the rules for sole trader business names You can register a trade mark if you want to stop people from trading under your business name. Apply to register a trade mark. In general, you need to keep most records for five years. Starting from when you prepared or obtained the records, or completed the transactions or acts they relate to. Manual bookkeeping systems use a series of books or ledger accounts.
You can often get these from your local newsagent, office supply or book store. The ATO is moving towards all electronic records. So, now may be a good time to go electronic.
Some advantages of digital record keeping include:. Check what software your accountant or business advisor recommends. Find out about the cloud computing software service on the ATO website. Are you confident using a computer, but don't have the funds for an accounting package? Consider setting up a series of spreadsheets for your accounts. Visit the ATO website for more information on manual and electronic record keeping systems.
As your business grows, you may find you need to update or upgrade to a POS system. These are computer systems that help you process sales and can support record keeping.
Read more about cash and accrual accounting for the advantages and disadvantages of each.
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