How long must I retain my self-assessment tax records?

 HMRC's preferred method of collecting income tax is self-assessment. Individuals who have earned money that HMRC is unaware of, such as earnings from a company, must declare it to HMRC in a self-assessment tax return.

 

Over the course of a tax year, the tax return reveals how much money a person received and from what sources. Several business owners are required to produce a tax return, transmit it to HMRC, and pay any outstanding debts by midnight on the 31st of January each year.

 

Why Should You Use Self-assessment?
If you need to file a self-assessment tax return for a certain tax year, you must first register with HMRC. Individuals must file their first self-assessment tax return for the fiscal year 2021 to 2022, which concluded on 5th April and must be registered with HMRC by 5th October 2022. Individuals who have already registered for self-assessment with HMRC do not need to do so again. 

 

Who should participate in a Self-Assessment?
If you were self-employed as a lone trader and earned more than £1000 or are partners in a business partnership, you must file a tax return for the previous year. If you make money by renting out a home or have received money from savings, dividends, or investments, you should do a self-assessment.

 

People who are entitled to tax relief on pension contributions, charitable donations, or maintenance payments must also file a return. Finally, if you seek child benefits as a high earner, you must file a tax return.

 

What documents should be kept and for how long?

 

It is necessary to have financial records that detail wages or income. It aids in the completion of self-assessment tax returns and the payment of owed taxes. HMRC may also request that the documents be checked as confirmation of any amounts put in the tax return. HMRC does not require detailed financial documents; instead, the yearly self-assessment tax return summarises them. HMRC will use the data to calculate how much tax is due after deductions and income tax relief. HMRC has no hard and fast guidelines about how they must retain their financial records.

 

As a single trader, you can keep track of your finances on paper or with computer spreadsheets, but utilizing trustworthy accounting or bookkeeping software may save you time and help you avoid mistakes.

 

All information on operational costs, expenses, and outgoing expenses that may be incurred for business purposes must be kept there. Even for modest transactions, sales receipts and invoices must be kept as proof of purchase since HMRC might request any of them. Furthermore, persons should preserve records for at least five years beyond the deadline for filing self-assessment tax returns on January 31st. HMRC may review the records before that date to confirm that the amounts are correct.