How long do you need to keep your tax records?

Keeping your paperwork in good order is an important part of money management. If you are wondering how long you need to keep your tax records for, this article has it covered.

If you are an employee

You will receive monthly payslips each time you are paid by your employer. After the end of the tax year, you will be sent a P60.

The P60 is an annual statement that shows all of the money you were paid in the tax year. It also shows the income tax paid and National Insurance contributions made during the same year.

HMRC recommends that you keep your payslips and P60s for at least 22 months from the end of the tax year.

So, any paperwork that refers to the tax year 2019/2020 should be kept at least until the end of January 2022.

If you are self-employed or a sole trader

You will need to complete your self-assessment tax return at the end of each tax year.

You should keep your business records for at least five years after the submission deadline for a given tax year.

So, if you submitted a return prior to the deadline on 31 January 2021, you need to keep this paperwork at least until the end of January 2026.

In certain situations, you may need to submit figures that have been calculated. This could include calculations for expenses or capital gains.

HMRC won’t necessarily need to see all calculations when you submit your return. However, it is a good idea to keep these on record.

If you are a business owner

If you are running a company, you must keep your tax records for at least six years from the end of the last financial year.

So, any records referring to the 2019/2020 financial year will need to be kept at least until April 2026.

Your paperwork should include all company accounts and records. If you own a business, it’s advisable to hire a professional, such as an accountant, to help maintain your financial paperwork.

Tax records of the deceased

An executor will need to administer the tax records of the deceased as part of probate.

HMRC can ask to see records up to 20 years after any Inheritance Tax has been paid.

This will include copies of the following paperwork:

• The will

• Signed Inheritance Tax forms and supporting documents

• Records showing all calculations, such as the valuation of assets

• Documents showing any unused Inheritance Tax threshold that can be transferred to a surviving spouse or civil partner

• The final accounts, including a letter from HMRC confirming payment of Inheritance Tax

Reasons to hold onto records for longer

If you can, it’s a good idea to hold onto your tax records for longer. This is especially the case for the self-employed or business owners.

If you are unfortunate enough to be the subject of an HMRC investigation, they will investigate your tax returns for the last four years. However, if they find information that suggests deliberate tax avoidance, they can go back as far as the last 20 years.

Storing tax records

If you have limited space, the prospect of keeping 20 years’ worth of records may seem daunting. However, in the digital age, you don’t have to store large amounts of physical paperwork.

You can undertake your calculations on spreadsheets and scan paperwork received from HMRC for electronic storage.

If you already have a computer, all you need is a scanner and a separate hard disk drive.

Take home

When considering how long you need to keep your tax records for, there is an argument for keeping them for as long as possible.

It doesn’t have to be a burden if you are organised and methodical. If necessary, you can hire a professional secretary or accountant to do this for you.

Further information on tax records is available from the gov.uk website.